<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>4
<FILENAME>s462456.txt
<DESCRIPTION>EXH. 99(A)(III)
<TEXT>
                           THE GABELLI UTILITY TRUST


                           STATEMENT OF PREFERENCES
                                      OF
                   SERIES B AUCTION MARKET PREFERRED SHARES

                  The Gabelli Utility Trust, a Delaware statutory trust, (the
"Trust"), hereby certifies that:

                  FIRST: The Board of Trustees of the Trust, at a meeting duly
convened and held on February 19, 2003, pursuant to authority expressly vested
in it by Article III of the Agreement and Declaration of Trust, adopted
resolutions classifying and designating 5,000 authorized but unissued capital
shares of the Trust, par value $.001 per share, as "Series B Auction Market
Preferred Shares" and authorizing the issuance of up to 5,000 Series B Auction
Market Preferred Shares at such times as the Pricing Committee should
determine.

                  SECOND: The Pricing Committee, at a meeting duly convened
and held on [ ] 2003, pursuant to authority granted it by the Board of
Trustees of the Trust at its February 19, 2003 meeting, approved the issuance
by the Trust of [ ] Series B Auction Market Preferred Shares.

                  THIRD: The preferences, rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption of the Series B Auction Market Preferred Shares, par value $.001
per share, as set by the Board of Trustees are as follows:

                                  DESIGNATION

                  Series B Preferred Shares: A series of 5,000 preferred
shares, par value $0.001 per share, liquidation preference $25,000 per share,
is hereby designated "Series B Auction Market Preferred Shares" (the "Series B
Preferred Shares"). Each share of Series B Preferred Shares may be issued on a
date to be determined by the Board of Trustees of the Trust; have an initial
dividend rate stated as a rate per annum, an initial Dividend Period and an
initial Dividend Payment Date as shall be determined in advance of the
issuance thereof by the Board of Trustees of the Trust; and have such other
preferences, rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption, in addition to those
required by applicable law or set forth in the Governing Documents applicable
to Preferred Shares of the Trust, as are set forth in this Statement of
Preferences. The Series B Preferred Shares shall constitute a separate series
of Preferred Shares.

                  As used in this Statement of Preferences, unless the context
requires otherwise, each capitalized term shall have the meaning ascribed to
it in paragraph 13 of Part I and paragraph 1 of Part II of this Statement of
Preferences.

                    Part I: Series B Preferred Shares Terms

1. Number of Shares; Ranking.

                  (a) The initial number of authorized and classified shares
constituting the Series B Preferred Shares to be issued is [__]. Additional
authorized and classified Series B Preferred Shares may be issued at any time
upon resolution by the Board of Trustees. No fractional Series B Preferred
Shares shall be issued.

                  (b) Series B Preferred Shares which at any time have been
redeemed or purchased by the Trust shall, after such redemption or purchase,
have the status of authorized but unissued Preferred Shares.

                  (c) The Series B Preferred Shares shall rank on a parity
with any other series of Preferred Shares as to the payment of dividends to
which such share is entitled.

                  (d) No Holder of Series B Preferred Shares shall have,
solely by reason of being such a holder, any preemptive or other right to
acquire, purchase or subscribe for any Preferred Shares or Common Shares or
other securities of the Trust which it may hereafter issue or sell.

2. Dividends.

                  (a) The Holders of Series B Preferred Shares shall be
entitled to receive, when, as and if declared by the Board of Trustees, out of
funds legally available therefor, cumulative cash dividends on their Series B
Preferred Shares at the dividend rate determined by the Board of Trustees in
the manner described under "Designation" above during the period from and
after the date on which the initial Series B Preferred Shares are originally
issued up to and including the last day of the initial Dividend Period and,
thereafter, at the rate, determined as set forth in paragraph 2(c), and no
more, payable on the respective dates determined as set forth in paragraph
2(b). Dividends on the Outstanding Series B Preferred Shares shall accumulate
from the date on which such shares are originally issued.

                  (b)     (i) Dividends shall be payable on the Series B
Preferred Shares when, as and if declared by the Board of Trustees following
the initial Dividend Payment Date, subject to paragraph 2(b)(ii), with respect
to any Dividend Period of 91 days or less, on the first Business Day following
the last day of such Dividend Period; provided, however, if the Dividend
Period is more than 91 days then monthly on the first Business Day of each
calendar month and on the first Business Day following the last day of such
Dividend Period.

                          (ii) If a day for payment of dividends resulting
from the application of paragraph 2(b)(i) above is not a Business Day, then
the Dividend Payment Date shall be the first Business Day following such day
for payment of dividends.

                          (iii) The Trust shall pay to the Paying Agent not
later than 12:00 noon, New York City time, on the Business Day immediately
preceding each Dividend Payment Date for Series B Preferred Shares, an
aggregate amount of immediately available funds equal to the dividends to be
paid to all Holders of such Series B Preferred Shares on such Dividend Payment
Date. The Trust shall not be required to establish any reserves for the
payment of dividends.

                          (iv) All moneys paid to the Paying Agent for the
payment of dividends shall be held in trust for the payment of such dividends
by the Paying Agent for the benefit of the Holders specified in paragraph
2(b)(v). Unless instructed by the Trust in writing the Paying Agent will hold
such moneys uninvested. Any moneys paid to the Paying Agent in accordance with
the foregoing but not applied by the Paying Agent to the payment of dividends,
including interest earned, if any, on such moneys, will, to the extent
permitted by law, be repaid to the Trust at the end of 90 days from the date
on which such moneys were to have been so applied.

                          (v) Each dividend on Series B Preferred Shares shall
be paid on the Dividend Payment Date therefor to the Holders of Series B
Preferred Shares as their names appear on the stock ledger or ownership
records of the Trust on the Business Day immediately preceding such Dividend
Payment Date; provided, however, that if dividends are in arrears, they may be
declared and paid at any time to Holders as their names appear on the stock
ledger or ownership records of the Trust on such date not exceeding 15 days
preceding the payment date thereof, as may be fixed by the Board of Trustees.
No interest will be payable in respect of any dividend payment or payments
which may be in arrears.

                  (c)     (i) For each Dividend Period after the initial
Dividend Period for the Outstanding Series B Preferred Shares, the dividend
rate shall be equal to the rate (stated as a rate per annum) that results from
an Auction (but the rate set at the Auction will not exceed the Maximum Rate);
provided, however, that if an Auction for any subsequent Dividend Period is
not held for any reason (other than as provided in the immediately following
sentence) or if Sufficient Clearing Bids have not been made in an Auction
(other than as a result of all Series B Preferred Shares being the subject of
Submitted Hold Orders), then the dividend rate on each Outstanding share of
19ries B Preferred Shares for any such Dividend Period shall be the Maximum
Rate, except as provided in 2(c)(ii) below. If an Auction is not held because
an unforeseen event or unforeseen events cause a day that otherwise would have
been an Auction Date not to be a Business Day, then the length of the
then-current Dividend Period shall be extended by seven days (or a multiple
thereof if necessary because of such unforeseen event or events), the
Applicable Rate for such period shall be the Applicable Rate for the Dividend
Period so extended and the Dividend Payment Date for such Dividend Period
shall be the first Business Day immediately succeeding the end of such period.

                          (ii) Subject to the cure provisions in paragraph
2(c)(iii) below, a Default Period with respect to the Outstanding Series B
Preferred Shares will commence if the Trust fails to deposit irrevocably in
trust in same-day funds, with the Paying Ageby 12;00 noonrk City
time on the Business Day immediately preceding the relevant Dividend Payment
Date, the full amount of any declared dividend on the Outstanding Series B
Preferred Shares then payable on that Dividend Payment Date (a "Dividend
Default").

                  Subject to the cure provisions of paragraph 2(c)(iii) below,
a Default Period with respect to a Dividend Default or a Redemption Default
shall end on the Business Day on which, by 12:00 noon, New York City time, all
unpaid dividends and any unpaid Redemption Price in respect of such Series B
Preferred Shares shall have been deposited irrevocably in trust in same-day
funds with the Paying Agent. In the case of a Default Period, the following
shall apply:

                  A.       Each Dividend Period that commences during a
                           Default Period will be a Standard Dividend Period.



                  B.       The dividend rate for each Dividend Period that
                           commences and concludes during a Default Period
                           will be equal to the Default Rate.

                  C.       In the event a Holder sells Series B Preferred
                           Shares at an Auction that takes place on the day a
                           Dividend Default occurs and the Default is not
                           cured in accordance with paragraph 2(c)(iii) below,
                           such former Holder shall be entitled to receive the
                           Default Rate with respect to the Series B Preferred
                           Shares such Holder sold at the Auction for the
                           Dividend Period with respect to which the Default
                           occurred.

                  D.       In the event a Dividend Period commences during a
                           Default Period and such Dividend Period continues
                           after such Default Period has ended, (a) the
                           dividend rate for the portion of such Dividend
                           Period that occurs during the Default Period will
                           be the Default Rate and (b) the dividend rate for
                           the portion of such Dividend Period that falls
                           outside the Default Period will be (i) the
                           Applicable Rate, in the case of the first Dividend
                           Period following a Default, or (ii) the Maximum
                           Rate, in the case of any other Dividend Period
                           commencing during a Default Period.

                  E.       The commencement of a Default Period will not by
                           itself cause the commencement of a new Dividend
                           Period.

                  F.       No Auction will be held during an applicable
                           Default Period; provided, however, that if a
                           Default Period shall end prior to the end of a
                           Standard Dividend Period that had commenced during
                           such Default Period, an Auction will be held on the
                           last day of such Standard Dividend Period.

                          (iii) No Default Period with respect to a Dividend
Default or Redemption Default shall be deemed to have commenced, unless such
default is due solely to the willful failure of the Trust, if the amount of
any dividend or any Redemption Price due is deposited irrevocably in trust in
same-day funds with the Paying Agent by 12:00 noon, New York City time within
three Business Days after the applicable Dividend Payment Date or Redemption
Date, together with an amount in respect of such Series B Preferred Shares
equal to the Default Rate applied to the amount of such non-payment based on
the actual number of days that would otherwise have comprised the Default
Period divided by 360. The "Default Rate" shall be equal to the Reference Rate
multiplied by three (3).

                          (iv) The amount of dividends per Series B Preferred
Share payable (if declared) on each Dividend Payment Date of each Dividend
Period of less than one year (or in respect of dividends on another date in
connection with a redemption during such Dividend Period) shall be computed by
multiplying the relevant Applicable Rate, Default Rate or Maximum Rate, as the
case may be, for such Dividend Period (or a portion thereof) by a fraction,
the numerator of which will be the number of days in such Dividend Period (or
portion thereof) that such Series B Preferred Share was Outstanding and for
which the Applicable Rate, Maximum Rate or the Default Rate was applicable
(but in no event shall the numerator exceed 360) and the denominator of which
will be 360, multiplying the amount so obtained by $25,000, and rounding the
amount so obtained to the nearest cent. During any Dividend Period of one year
or more, the amount of dividends per Series B Preferred Share payable on any
Dividend Payment Date (or in respect of dividends on another date in
connection with a redemption during such Dividend Period) will be computed as
described in the preceding sentence except that the numerator, with respect to
any full twelve month period, will be 360.

                  (d) Any dividend payment made on Series B Preferred Shares
shall first be credited against the earliest accumulated but unpaid dividends
due with respect to such shares.

                  (e) For so long as the Series B Preferred Shares are
Outstanding, except as otherwise contemplated by Part I of this Statement of
Preferences, the Trust shall not pay any dividend or other distribution (other
than a dividend or distribution paid in shares of, or options, warrants or
rights to subscribe for or purchase, Common Shares or other shares, if any,
ranking junior to the Series B Preferred Shares as to dividends and upon
liquidation) with respect to Common Shares or any other capital shares of the
Trust ranking junior to the Series B Preferred Shares as to dividends or upon
liquidation, or call for redemption, redeem, purchase or otherwise acquire for
consideration any Common Shares or other capital shares ranking junior to the
Series B Preferred Shares (except by conversion into or exchange for shares of
the Trust ranking junior to the Series B Preferred Shares as to dividends and
upon liquidation), unless, in each case, (i) immediately after such
transaction, the Trust would have Eligible Assets with an aggregate Discounted
Value at least equal to the Basic Maintenance Amount and Asset Coverage would
be achieved, (ii) all cumulative and unpaid dividends due on or prior to the
date of the transaction have been declared and paid in full with respect to
the Trust's Preferred Shares, including the Series B Preferred Shares (or
shall have been declared and sufficient funds for the payment thereof
deposited with the applicable Paying Agent) and (iii) the Trust has redeemed
the full number of Preferred Shares to be redeemed mandatorily pursuant to any
provision for mandatory redemption contained herein, including, without
limitation, any such provision contained in paragraph 3(a)(ii).

                  (f) No full dividends shall be declared or paid on the
Series B Preferred Shares for any Dividend Period or part thereof, unless full
cumulative dividends due through the most recent Dividend Payment Dates
therefor for all Outstanding series of Preferred Shares of the Trust ranking
on a parity with the Series B Preferred Shares as to the payment of dividends
have been or contemporaneously are declared and paid through the most recent
Dividend Payment Dates therefor. If full cumulative dividends due have not
been paid on all Outstanding Preferred Shares, any dividends being paid on
such Preferred Shares (including the Series B Preferred Shares) will be paid
as nearly pro rata as possible in proportion to the respective amounts of
dividends accumulated but unpaid on each such series of Preferred Shares then
Outstanding on the relevant Dividend Payment Date.

3. Redemption.

                  (a)      (i) Optional Redemption. After the initial Dividend
Period, subject to any Non-Call Period and the provisions of this paragraph 3,
and to the extent permitted under the 1940 Act and Delaware law, the Trust
may, at its option, redeem in whole or in part out of funds legally available
therefor, Series B Preferred Shares by delivering a notice of redemption not
less than 7 calendar days and not more than 40 calendar days prior to the
Redemption Date at the applicable Redemption Price. Notwithstanding the
foregoing, the Trust shall not give a notice of any redemption pursuant to
this paragraph 3(a)(i) unless, on the date on which the Trust gives such
notice (x) the Trust reasonably believes that, assuming the fulfillment of any
conditions precedent specified in such notice, it will be able to deposit with
the Paying Agent when due Deposit Assets with maturity or tender dates not
later than the day preceding the applicable Redemption Date and having a value
not less than the Redemption Price due to Holders of the Series B Preferred
Shares to be redeemed on the Redemption Date and (y) the Trust would have
Eligible Assets with an aggregate Discounted Value at least equal to the Basic
Maintenance Amount and Asset Coverage immediately subsequent to such
redemption, if such redemption were to occur on such date, it being understood
that the provisions of paragraph 3(d) shall be applicable in such
circumstances in the event the Trust makes the deposit and takes the other
action required thereby.


                           (ii) Mandatory Redemption. So long as Series B
Preferred Shares are Outstanding, if the Trust fails (A) as of any Valuation
Date to meet the Basic Maintenance Test and such failure is not cured by the
Basic Maintenance Amount Cure Date or (B) as of any Quarterly Valuation Date
to meet Asset Coverage and such failure is not cured by the Series B Asset
Coverage Cure Date or (C) as of any valuation or measuring date applicable to
any other series of Preferred Shares to meet any applicable maintenance amount
test and such failure is not cured by the relevant cure date (any such cure
date, together with any Basic Maintenance Amount Cure Date or Series B Asset
Coverage Cure Date, a "Cure Date"), Preferred Shares, which at the Trust's
determination may include Series B Preferred Shares, will be subject to
mandatory redemption out of funds legally available therefor. The series and
number of Preferred Shares to be redeemed in such circumstances will be
determined by the Trust, subject to the limitations of the 1940 Act and
Delaware law, from among all series of Preferred Shares then Outstanding and
may include any proportion of Series B Preferred Shares (or any other series
of Preferred Shares). The amount of Preferred Shares to be mandatorily
redeemed under such circumstances shall, in the aggregate, equal the lesser of
(1) the minimum amount of Preferred Shares (including the Series B Preferred
Shares if so determined by the Trust) the redemption of which, if deemed to
have occurred immediately prior to the opening of business on the relevant
Cure Date, would result in the Trust meeting, as the case may be, the Basic
Maintenance Test, Asset Coverage and any other then applicable maintenance
amount test, in each case as of the relevant Cure Date (provided that, if
there is no such minimum amount of Preferred Shares the redemption of which
would have such result, all Series B Preferred Shares then Outstanding will be
redeemed), and (2) the maximum amount of Preferred Shares that can be redeemed
out of funds expected to be available therefor on the Mandatory Redemption
Date at the applicable Redemption Price; provided, that in the event that
Preferred Shares are redeemed mandatorily pursuant to this paragraph 3, the
Trust may, but is not required to, redeem a sufficient amount of additional
Series B Preferred Shares, which when aggregated with other Preferred Shares
redeemed by the Trust, permits the Trust to have (x) Eligible Assets with
Adjusted Value with re spect to the Preferred Shares remaining Outstanding of
as great as 110% of the Basic Maintenance Amount and (y) Asset Coverage with
respect to the Preferred Shares remaining Outstanding of as much as 220%.

                           (iii) Subject to the Statement of Preferences
establishing each series of Preferred Shares and the 1940 Act, the Trust may
determine the shares and series of Preferred Shares to be redeemed in
accordance with the paragraph 3(a)(ii) above, subject to the further
provisions of this paragraph 3(a)(iii). The Trust shall effect any mandatory
redemption of Series B Preferred Shares relating to: (A) a failure to meet the
Basic Maintenance Test or a failure to meet Asset Coverage, no later than 8
days following such Cure Date, provided, that if such 8th day is not a
Business Day, such redemption will occur not later than the close of business
on the next Business Day or (B) a failure to meet any other then applicable
maintenance amount test in accordance with the requirements of such test (in
each case the date specified for such redemption being, the "Mandatory
Redemption Date"), except that if the Trust does not have funds legally
available for the redemption of, or is not otherwise legally permitted to
redeem, the amount of Preferred Shares which would be mandatorily redeemed by
the Trust under subparagraph 3(a)(ii) if sufficient funds were available, or
the Trust otherwise is unable to effect such redemption on or prior to the
applicable Mandatory Redemption Date, the Trust shall redeem on such
redemption date the number of Series B Preferred Shares and other Preferred
Shares with respect to which it has given notice of redemption as it shall
have legally available funds, or is otherwise able, to redeem ratably on the
basis of Redemption Price from each holder whose shares are to be redeemed,
and the remainder of the Series B Preferred Shares and other Preferred Shares
which it was unable to redeem on the earliest practicable date on which the
Trust will have such funds available upon notice, in the case of Series B
Preferred Shares, pursuant to paragraph 3(b) to Holders of the Series B
Preferred Shares to be redeemed. The Trust will deposit with the Paying Agent
funds sufficient to redeem the specified number of Series B Preferred Shares
subject to a redemption under this paragraph 3(a) by 12:00 noon, New York City
time, of the Business Day immediately preceding the redemption date. If fewer
than all of the Outstanding Series B Preferred Shares are to be redeemed, the
number of Series B Preferred Shares to be redeemed shall be redeemed pro rata
from the Holders of such shares in proportion to the number of Series B
Preferred Shares held by such Holders, by lot or by such other method as the
Trust shall deem fair and equitable, subject, however, to the terms of any
applicable Specific Redemption Provisions.

                  (b) In the event of a redemption of Series B Preferred
Shares pursuant to paragraph 3(a) above, the Trust will have filed or will
file a notice of its intention to redeem with the Commission, in either case
so as to provide at least the minimum notice required under Rule 23c-2 under
the 1940 Act or any successor provision. In addition, the Trust shall deliver
a notice of redemption to the Auction Agent (the "Notice of Redemption")
containing the information set forth below (i) in the case of an optional
redemption pursuant to paragraph 3(a)(i) above, one Business Day prior to the
giving of notice to the Holders and (ii) in the case of a mandatory redemption
pursuant to paragraph 3(a)(ii) above, on or prior to the 7th day preceding the
Mandatory Redemption Date. The Auction Agent will use its reasonable efforts
to provide telephonic, electronic or written notice to each Holder of any
Series B Preferred Shares called for redemption not later than the close of
business on the Business Day immediately following the day on which the Trust
determines the shares to be redeemed (or, during a Default Period with respect
to such shares, not later than the close of business on the Business Day
immediately following the day on which the Auction Agent receives Notice of
Redemption from the Trust). The Auction Agent shall confirm a telephonic
notice in writing not later than the close of business on the third Business
Day preceding the date fixed for redemption by providing the Notice of
Redemption to each Holder of shares called for redemption, the Paying Agent
(if different from the Auction Agent) and the Securities Depository. The
Notice of Redemption will be addressed to the Holders of Series B Preferred
Shares at their addresses appearing on the share records of the Trust. Such
Notice of Redemption will set forth (s) the date fixed for redemption, (t) the
number or percentage of Series B Preferred Shares to be redeemed, (u) the
CUSIP number(s) of such shares, (v) the Redemption Price (specifying the
amount of accumulated dividends and any applicable redemption premium to be
included therein), (w) the place or places where such shares are to be
redeemed, (x) that dividends on the shares to be redeemed will cease to
accumulate on such date fixed for redemption, (y) the provision of this
Statement of Preferences under which redemption shall be made, and (z) in the
case of a redemption pursuant to paragraph 3(a)(i), any conditions precedent
to such redemption. If fewer than all the Outstanding Series B Preferred
Shares held by any Holder are to be redeemed, the Notice of Redemption mailed
to such Holder shall also specify the number or percentage of Series B
Preferred Shares to be redeemed from such Holder. No defect in the Notice of
Redemption or in the transmittal or mailing thereof will affect the validity
of the redemption proceedings, except as required by applicable law.

                  (c) Notwithstanding the provisions of paragraph 3(a), the
Trust shall not redeem Preferred Shares unless all accumulated and unpaid
dividends on all Outstanding Series B Preferred Shares and other Preferred
Shares ranking on a parity with the Series B Preferred Shares with respect to
dividends for all applicable past Dividend Periods (whether or not earned or
declared by the Trust) have been or are contemporaneously paid or declared and
Deposit Assets for the payment of such dividends have been deposited with the
Paying Agent; provided, however, that the foregoing shall not prevent the
purchase or acquisition of outstanding Preferred Shares pursuant to the
successful completion of an otherwise lawful purchase or exchange offer made
on the same terms to holders of all Outstanding Series B Preferred Shares.

                  (d) Upon the deposit of funds sufficient to redeem Series B
Preferred Shares with the Paying Agent and the giving of the Notice of
Redemption to the Auction Agent under paragraph 3(b) above, such shares shall
no longer be deemed to be Outstanding for any purpose (including, without
limitation, for purposes of calculating whether the Trust has met the Basic
Maintenance Test or Asset Coverage), and all rights of the Holders of the
Series B Preferred Shares so called for redemption shall cease and terminate,
except the right of such Holder to receive the applicable Redemption Price,
but without any interest or other additional amount. Such Redemption Price
shall be paid by the Paying Agent to the nominee of the Securities Depository.
The Trust shall be entitled to receive from the Paying Agent, promptly after
the date fixed for redemption, any cash deposited with the Paying Agent in
excess of (i) the aggregate Redemption Price of the Series B Preferred Shares
called for redemption on such date and (ii) such other amounts, if any, to
which Holders of the Series B Preferred Shares called for redemption may be
entitled. Any funds so deposited that are unclaimed at the end of two years
from such redemption date shall, to the extent permitted by law, be paid to
the Trust, after which time the Holders of Series B Preferred Shares so called
for redemption may look only to the Trust for payment of the Redemption Price
and all other amounts, if any, to which they may be entitled; provided,
however, that the Paying Agent shall notify all Holders whose funds are
unclaimed by placing a notice in The Wall Street Journal concerning the
availability of such funds for three consecutive weeks. The Trust shall be
entitled to receive, from time to time after the date fixed for redemption,
any interest earned on the funds so deposited.

                  (e) A Default Period with respect to the Outstanding Series
B Preferred Shares will commence if the Trust fails to deposit irrevocably in
trust in same-day funds, with the Paying Agent by 12:00 noon, New York City
time on the Business Day preceding the redemption date specified in the Notice
of Redemption (the "Redemption Date") or on such later date as the Paying
Agent shall authorize, the full amount of any Redemption Price payable on such
Redemption Date (a "Redemption Default"); provided, that no Redemption Default
shall be deemed to have occurred in respect of Series B Preferred Shares when
the related redemption notice provides that the redemption of such Series B
Preferred Shares is subject to one or more conditions precedent and each such
condition precedent shall not have been satisfied at the time or times or in
the manner specified in such Notice of Redemption. To the extent a Redemption
Default occurs with respect to Series B Preferred Shares or that any
redemption for which Notice of Redemption has been given is otherwise
prohibited, such redemption shall be made as soon as practicable to the extent
such funds become legally available or such redemption is no longer otherwise
prohibited. Notwithstanding the fact that a Redemption Default has
occurred and is continuing or that the Trust has otherwise failed to redeem
Series B Preferred Shares for which a Notice of Redemption has been given,
dividends may be declared and if so declared will be paid on Series B
Preferred Shares, which shall include those Series B Preferred Shares for
which Notice of Redemption has been given but for which deposit of funds has
not been made.

                  (f) All moneys paid to the Paying Agent for payment of the
Redemption Price of Series B Preferred Shares called for redemption shall be
held in trust by the Paying Agent for the benefit of Holders of the Series B
Preferred Shares so to be redeemed. A Redemption Default will occur on account
of the Trust's failure to timely deposit any required Redemption Price with
the Paying Agent and any resulting Default Period will end in accordance with
paragraph 2(c)(ii).

                  (g) So long as the Series B Preferred Shares are held of
record by the nominee of the Securities Depository, the Redemption Price for
such shares will be paid on the date fixed for redemption to the nominee of
the Securities Depository for distribution to agent members for distribution
to the Persons for whom they are acting as agent.

                  (h) Except for the provisions described above, nothing
contained in this Statement of Preferences limits any right of the Trust to
purchase or otherwise acquire Series B Preferred Shares outside of an Auction
at any price, whether higher or lower than the price that would be paid in
connection with an optional or mandatory redemption, so long as, at the time
of any such purchase, there is no arrearage in the payment of dividends on, or
the Redemption Price with respect to, any Series B Preferred Shares for which
Notice of Redemption has been given, and the Trust meets Asset Coverage and
the Basic Maintenance Test after giving effect to such purchase or acquisition
on the date thereof. Any Series B Preferred Shares which are purchased,
redeemed or otherwise acquired by the Trust shall have no voting rights. If
fewer than all the Outstanding Series B Preferred Shares are redeemed or
otherwise acquired by the Trust, the Trust shall give notice of such
transaction to the Auction Agent.

                  (i) In the case of any redemption pursuant to this paragraph
3, only whole Series B Preferred Shares shall be redeemed, and in the event
that any provision of the Governing Documents would require redemption of a
fractional share, the Auction Agent shall be authorized to round up so that
only whole shares are redeemed.

                  (j) Notwithstanding anything herein to the contrary, the
Board of Trustees may authorize, create or issue other series of Preferred
Shares ranking on a parity with the Series B Preferred Shares with respect to
the payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Trust, to the extent permitted
by the 1940 Act, if upon issuance of any such series, either (i) the net
proceeds from the sale of such shares (or such portion thereof needed to
redeem or repurchase the Outstanding Series B Preferred Shares) are deposited
with the Auction Agent, Notice of Redemption as contemplated by paragraph 3(b)
has been delivered prior thereto or is sent promptly thereafter, and such
proceeds are used to redeem all Outstanding Series B Preferred Shares or (ii)
the Trust would meet Asset Coverage, the Basic Maintenance Test and the
requirements of paragraph 9 immediately following such issuance and any
redemption of Preferred Shares (which may include a portion of the Series B
Preferred Shares) to be effected with the proceeds of such issuance.

4. Designation of Dividend Period.

                  (a) The initial Dividend Period for the Series B Preferred
Shares shall be as determined in the manner under "Designation" above. The
Trust shall designate the duration of subsequent Dividend Periods of the
Series B Preferred Shares; provided, however, that no such designation shall
be necessary for a Standard Dividend Period and, provided further, that any
designation of a Special Dividend Period for the Series B Preferred shall be
effective only if (i) notice thereof shall have been given as provided herein,
(ii) any failure to pay in a timely manner to the Auction Agent the full
amount of any dividend on, or the Redemption Price of, the Series B Preferred
Shares shall have been cured as provided for herein, (iii) Sufficient Clearing
Orders shall have existed in an Auction held for the Series B Preferred Shares
on the Auction Date immediately preceding the first day of such proposed
Special Dividend Period, (iv) if the Trust shall have mailed a Notice of
Redemption with respect to any Series B Preferred Shares, the Redemption Price
with respect to such shares shall have been deposited with the Paying Agent,
and (v) the Trust has confirmed that as of the Auction Date next preceding the
first day of such Special Dividend Period, it has Eligible Assets with an
aggregate Discounted Value at least equal to the Basic Maintenance Amount, and
the Trust has consulted with the Broker-Dealers and has provided notice of
such designation and a Basic Maintenance Report for the most recent Valuation
Date to each Rating Agency.

                  (b) If the Trust proposes to designate any Special Dividend
Period, not fewer than seven Business Days (or two Business Days in the event
the duration of the Dividend Period prior to such Special Dividend Period is
fewer than ten Business Days) nor more than 30 Business Days prior to the
first day of such Special Dividend Period, notice shall be (i) made by press
release and (ii) communicated by the Trust by telephonic or other means to the
Auction Agent and confirmed in writing promptly thereafter. Each such notice
shall state (x) that the Trust proposes to exercise its option to designate a
succeeding Special Dividend Period, specifying the first and last days thereof
and (y) that the Trust will by 3:00 P.M., New York City time, on the second
Business Day next preceding the first day of such Special Dividend Period,
notify the Auction Agent, who will promptly notify the Broker-Dealers, of
either (A) its determination, subject to certain conditions, to proceed with
such Special Dividend Period, subject to the terms of any Specific Redemption
Provisions, or (B) its determination not to proceed with such Special Dividend
Period, in which latter event the succeeding Dividend Period shall be a
Standard Dividend Period. No later than 3:00 P.M., New York City time, on the
second Business Day next preceding the first day of any proposed Special
Dividend Period, the Trust shall deliver to the Auction Agent, who will
promptly deliver to the Broker-Dealers and Existing Holders, either:

                          (1) a notice stating (a) that the Trust has
determined to designate the next succeeding Dividend Period as a Special
Dividend Period, (b) the first and last days thereof and (c) the terms of any
Specific Redemption Provisions; or

                          (2) a notice stating that the Trust has determined
not to exercise its option to designate a Special Dividend Period.

         If the Trust fails to deliver either such notice with respect to the
designation of any proposed Special Dividend Period to the Auction Agent or is
unable to make the confirmation provided in paragraph 4(a)(v) by 3:00 P.M.,
New York City time, on the second Business Day next preceding the first day of
such proposed Special Dividend Period, the Trust shall be deemed to have
delivered a notice to the Auction Agent with respect to such Dividend Period
to the effect set forth in clause (2) above, thereby resulting in a Standard
Dividend Period.

5. Restrictions on Transfer.

         Series B Preferred Shares may be transferred only (a) pursuant to an
Order placed in an Auction, (b) to or through a Broker-Dealer or (c) to the
Trust or any Affiliate. Notwithstanding the foregoing, a transfer other than
pursuant to an Auction will not be effective unless the selling Existing
Holder or the Agent Member of such Existing Holder (in the case of an Existing
Holder whose shares are listed in its own name on the books of the Auction
Agent), or the Broker-Dealer or Agent Member of such Broker-Dealer (in the
case of a transfer between persons holding any Series B Preferred Shares
through different Broker-Dealers), advises the Auction Agent of such transfer.
Any certificates representing Series B Preferred Shares issued to the
Securities Depository will bear legends with respect to the restrictions
described above and stop-transfer instructions will be issued to the Transfer
Agent and/or Registrar.

6. Voting Rights.

                  (a) General.

                  Except as otherwise provided in the Governing Documents or a
resolution of the Board of Trustees, or as required by applicable law, Holders
of Series B Preferred Shares shall have no power to vote on any matter except
matters submitted to a vote of the Common Shares. In any matter submitted to a
vote of the holders of the Common Shares, each Holder of Series B Preferred
Shares shall be entitled to one vote for each Series B Preferred Share held
and the Holders of Outstanding Preferred Shares and Common Shares shall vote
together as a single class; provided, however, that at any meeting of the
shareholders of the Trust held for the election of trustees, the Holders of
Outstanding Preferred Shares, including the Series B Preferred Shares, shall
be entitled, as a class, to the exclusion of the holders of all other
securities and classes of capital shares of the Trust, to elect a number of
the Trust's trustees, such that following the election of trustees at the
meeting of the shareholders, the Trust's Board of Trustees shall contain two
trustees elected by the Holders of the Outstanding Preferred Shares as a
class. Subject to paragraph 6(b), the holders of outstanding capital shares of
the Trust, including the Holders of Outstanding Preferred Shares, including
the Series B Preferred Shares, voting as a single class, shall elect the
balance of the trustees.

                  (b) Right to Elect Majority of Board of Trustees.

                  During any period in which any one or more of the conditions
described below shall exist (such period being referred to herein as a "Voting
Period"), the number and/or composition of trustees constituting the Board of
Trustees shall be adjusted as necessary to permit the Holders of the
Outstanding Preferred Shares, including the Series B Preferred Shares, voting
separately as one class (to the exclusion of the holders of all other
securities and classes of capital shares of the Trust) to elect the number of
trustees that, when added to the two trustees elected exclusively by the
Holders of Preferred Shares pursuant to paragraph 6(a) above, would constitute
a simple majority of the Board of Trustees as so adjusted. The Trust and the
Board of Trustees shall take all necessary actions, including effecting the
removal of trustees or the amendment of the Trust's Declaration, to effect an
adjustment of the number and/or composition of trustees as described in the
preceding sentence. A Voting Period shall commence:

                          (i) if at any time accumulated dividends (whether or
not earned or declared, and whether or not funds are then legally available in
an amount sufficient therefor) on the Outstanding Series B Preferred Shares
equal to at least two full years' dividends shall have become due and unpaid
and sufficient cash or specified securities shall not have been deposited with
the Paying Agent for the payment in full of such accumulated dividends; or

                          (ii) if at any time Holders of any other Preferred
Shares are entitled to elect a majority of the trustees of the Trust under the
1940 Act or the Statement of Preferences creating such shares.

         Upon the termination of a Voting Period, the voting rights described
in this paragraph 6(b) shall cease, subject always, however, to the reverting
of such voting rights in the holders of Preferred Shares upon the further
occurrence of any of the events described in this paragraph 6(b).

                  (c) Right to Vote with Respect to Certain Other Matters.

                  Subject to paragraph 1 of Part III of this Statement of
Preferences, so long as the Series B Preferred Shares are Outstanding, the
Trust shall not, without the affirmative vote of the Holders of a majority (as
defined in the 1940 Act) of the Preferred Shares Outstanding at the time and
present and voting on such matter, voting separately as one class, amend,
alter or repeal the provisions of the Governing Documents so as to in the
aggregate adversely affect the rights and preferences set forth in any
Statement of Preferences, including the Series B Preferred Shares. To the
extent permitted under the 1940 Act, in the event more than one series of
Preferred Shares are Outstanding, the Trust shall not effect any of the
actions set forth in the preceding sentence which in the aggregate adversely
affects the rights and preferences set forth in the Statement of Preferences
for a series of Preferred Shares differently than such rights and preferences
for any other series of Preferred Shares without the affirmative vote of the
Holders of at least a majority of the Preferred Shares Outstanding and present
and voting on such matter of each series adversely affected (each such
adversely affected series voting separately as a class to the extent its
rights are affected differently). The Holders of the Series B Preferred Shares
shall not be entitled to vote on any matter that affects the rights or
interests of only one or more other series of Preferred Shares. The Trust
shall notify each Rating Agency ten Business Days prior to any such vote
described above. Unless a higher percentage is required under the Governing
Documents or applicable provisions of the Delaware Statutory Trust Act or the
1940 Act, the affirmative vote of the Holders of a majority of the Outstanding
Preferred Shares, including the Series B Preferred Shares, voting together as
a single class, will be required to approve any plan of reorganization
adversely affecting the Preferred Shares or any action requiring a vote of
security holders under Section 13(a) of the 1940 Act. For purposes of this
paragraph 6(c), the phrase "vote of the Holders of a majority of the
Outstanding Preferred Shares" (or any like phrase) shall mean, in accordance
with Section 2(a)(42) of the 1940 Act, the vote, at the annual or a special
meeting of the shareholders of the Trust duly called (i) of 67 percent or more
of the Preferred Shares present at such meeting, if the Holders of more than
50 percent of the Outstanding Preferred Shares are present or represented by
proxy; or (ii) of more than 50 percent of the Outstanding Preferred Shares,
whichever is less. The class vote of Holders of Preferred Shares described
above will in each case be in addition to a separate vote of the requisite
percentage of Common Shares and Preferred Shares, including the Series B
Preferred Shares, voting together as a single class, necessary to authorize
the action in question. An increase in the number of authorized Preferred
Shares pursuant to the Governing Documents or the issuance of additional
shares of any series of Preferred Shares (including the Series B Preferred
Shares) pursuant to the Governing Documents shall not in and of itself be
considered to adversely affect the rights and preferences of the Holders of
Preferred Shares.

                  (d) Voting Procedures.

                          (i) As soon as practicable after the accrual of any
right of the Holders of Preferred Shares, including the Series B Preferred
Shares, to elect additional trustees as described in paragraph 6(b), the Trust
shall call a special meeting of such Holders and instruct the Auction Agent to
mail a notice of such special meeting to the Holders of Series B Preferred
Shares, such meeting to be held not less than 10 nor more than 20 days after
the date of mailing of such notice. If the Trust fails to send such notice to
the Auction Agent or if the Trust does not call such a special meeting, it may
be called by any such Holder on like notice. The record date for determining
the Holders entitled to notice of and to vote at such special meeting shall be
the close of business on the day on which such notice is mailed or such other
day as the Board of Trustees shall determine. At any such special meeting and
at each meeting held during a Voting Period, such Holders of Preferred Shares,
voting together as a class (to the exclusion of the holders of all other
securities and classes of capital shares of the Trust), shall be entitled to
elect the number of trustees prescribed in paragraph 6(b) on a
one-vote-per-share basis. At any such meeting, or adjournment thereof in the
absence of a quorum, a majority of the Holders of Preferred Shares, including
the Series B Preferred Shares, present in person or by proxy shall have the
power to adjourn the meeting without notice, other than an announcement at the
meeting, until a date not more than 120 days after the original record date.

                          (ii) For purposes of determining any rights of the
Holders of the Preferred Shares, including the Series B Preferred Shares, to
vote on any matter, whether such right is created by this Statement of
Preferences, by the other provisions of the Governing Documents, by statute or
otherwise, a share of Series B Preferred Shares which is not Outstanding shall
not be counted.

                          (iii) The terms of office of all persons who are
trustees of the Trust at the time of a special meeting of Holders of Preferred
Shares to elect trustees and who remain trustees following such meeting shall
continue, notwithstanding the election at such meeting by such Holders of the
number of trustees that they are entitled to elect, and the persons so elected
by such Holders, together with the two incumbent trustees elected by the
Holders of Preferred Shares and the remaining incumbent trustees elected by
the holders of the Common Shares and Preferred Shares, shall constitute the
duly elected trustees of the Trust.

                          (iv) Upon the expiration of a Voting Period, the
terms of office of the additional trustees elected by the Holders of Preferred
Shares pursuant to paragraph 6(b) above shall expire, and the remaining
trustees shall constitute the trustees of the Trust and the voting rights of
such Holders of Preferred Shares, including Series B Preferred Shares, to
elect additional trustees pursuant to paragraph 6(b) above shall cease,
subject to the provisions of the last sentence of paragraph 6(b). Upon the
expiration of the terms of the trustees elected by the holders of Preferred
Shares pursuant to paragraph 6(b) above, the number of trustees shall be
automatically reduced to the number of trustees on the Board immediately
preceding such Voting Period.

                  (e) Exclusive Remedy.

                  Unless otherwise required by law, the Holders of Series B
Preferred Shares shall not have any rights or preferences other than those
specifically set forth herein. The Holders of Series B Preferred Shares shall
have no preemptive rights or rights to cumulative voting. In the event that
the Trust fails to pay any dividends on the Series B Preferred Shares, the
exclusive remedy of the Holders shall be the right to vote for trustees
pursuant to the provisions of this paragraph 6.

                  (f) Notification to Rating Agency.

                  In the event a vote of Holders of Preferred Shares is
required pursuant to the provisions of Section 13(a) of the 1940 Act, as long
as the Series B Preferred Shares are rated by a Rating Agency at the request
of the Trust, the Trust shall, not later than ten Business Days prior to the
date on which such vote is to be taken, notify each Rating Agency that such
vote is to be taken and the nature of the action with respect to which such
vote is to be taken and, not later than ten Business Days after the date on
which such vote is taken, notify each Rating Agency of the result of such
vote.

7. Liquidation Rights.

                  (a) In the event of any liquidation, dissolution or winding
up of the affairs of the Trust, whether voluntary or involuntary, the Holders
of Series B Preferred Shares shall be entitled to receive out of the assets of
the Trust available for distribution to shareholders, after claims of
creditors but before any distribution or payment shall be made in respect of
the Common Shares or any other shares of the Trust ranking junior to the
Series B Preferred Shares as to liquidation payments, a liquidation
distribution in the amount of $25,000.00 per share (the "Liquidation
Preference"), plus an amount equal to all unpaid dividends accumulated to and
including the date fixed for such distribution or payment (whether or not
earned or declared by the Trust, but excluding interest thereon), and such
Holders shall be enti tled to no further participation in any distribution or
payment in connection with any such liquidation, dissolution or winding up.

                  (b) If, upon any liquidation, dissolution or winding up of
the affairs of the Trust, whether voluntary or involuntary, the assets of the
Trust available for distribution among the Holders of all Outstanding Series B
Preferred Shares, and any other Outstanding class or series of Preferred
Shares ranking on a parity with the Series B Preferred Shares as to payment
upon liquidation, shall be insufficient to permit the payment in full to such
Holders of Series B Preferred Shares of the Liquidation Preference plus
accumulated and unpaid dividends and the amounts due upon liquidation with
respect to such other Preferred Shares, then such available assets shall be
distributed among the Holders of Series B Preferred Shares and such other
Preferred Shares ratably in proportion to the respective preferential
liquidation amounts to which they are entitled. Unless and until the
Liquidation Preference plus accumulated and unpaid dividends has been paid in
full to the Holders of Series B Preferred Shares, no dividends or
distributions will be made to holders of Common Shares or any other shares of
the Trust ranking junior to the Series B Preferred Shares as to liquidation.

8. Auction Agent.

         For so long as the Series B Preferred Shares are Outstanding, the
Auction Agent, duly appointed by the Trust to so act, shall be in each case a
commercial bank, trust company or other financial institution independent of
the Trust and its Affiliates (which, however, may engage or have engaged in
business transactions with the Trust or its Affiliates) and at no time shall
the Trust or any of its Affiliates act as the Auction Agent in connection with
the Auction Procedures. If the Auction Agent resigns or for any reason its
appointment is terminated during any period that any Series B Preferred Shares
are Outstanding, the Trust shall use its best efforts promptly thereafter to
appoint another qualified commercial bank, trust company or financial
institution to act as the Auction Agent.

9. Coverage Tests.

                  (a) Determination of Compliance.

                  For so long as the Series B Preferred Shares are
Outstanding, the Trust shall make the following determinations:

                           (i) Asset Coverage as follows:

                           (A) As of each Quarterly Valuation Date, the Trust
shall determine whether Asset Coverage is met as of that date. In the event
the Trust determines that it has failed to meet Asset Coverage as of such
Quarterly Valuation date, the Trust will notify each Rating Agency of such
failure in writing (which notification may be by facsimile or other electronic
means) on or before 5:00 P.M., New York City time, on the fifth Business Day
following the date of such determination.

                           (B) The Trust shall deliver to each Rating Agency
an "Asset Coverage Certificate" which sets forth the determination of
paragraph 9(a)(i)(A) above (1) as of the Date of Original Issue and,
thereafter, (2) as of (x) each Quarterly Valuation Date and (y) a Business Day
on or before any Series B Asset Coverage Cure Date following a failure to meet
Asset Coverage. Such Asset Coverage Certificate shall be delivered in the case
of clause (1) on the Date of Original Issue and in the case of clause (2) on
or before the seventh Business Day following such Quarterly Valuation Date or
the relevant Cure Date, as the case may be.

                           (ii) Basic Maintenance Amount as follows:

                           (A) For so long as the Series B Preferred Shares
are rated by Moody's and/or S&P at the Trust's request, the Trust shall
maintain, on each Valuation Date, Eligible Assets having an Adjusted Value at
least equal to the Basic Maintenance Amount, as of such Valuation Date. Upon
any failure to maintain Eligible Assets having an Adjusted Value at least
equal to the Basic Maintenance Amount, the Trust shall use all commercially
reasonable efforts to re-attain Eligible Assets having an Adjusted Value at
least equal to the Basic Maintenance Amount on or prior to the Basic
Maintenance Amount Cure Date, by altering the composition of its portfolio or
otherwise.

                           (B) On or before 5:00 P.M., New York City time, on
the fifth Business Day after a Valuation Date on which the Trust fails to
satisfy the Basic Maintenance Amount, and on the fifth Business Day after the
Basic Maintenance Amount Cure Date with respect to such Valuation Date, the
Trust shall complete and deliver to each Rating Agency a Basic Maintenance
Report as of the date of such failure or such Basic Maintenance Amount Cure
Date, as the case may be, which will be deemed to have been delivered to such
Rating Agency if such Rating Agency receives a copy or facsimile or other
electronic transcription or transmission thereof and on the same day the Trust
mails or sends to such Rating Agency for delivery on the next Business Day the
full Basic Maintenance Report. The Trust shall also deliver a Basic
Maintenance Report to each Rating Agency as of each Monthly Valuation Date, in
each case on or before the fifth Business Day after such day. A failure by the
Trust to deliver a Basic Maintenance Report pursuant to the preceding sentence
shall be deemed to be delivery of a Basic Maintenance Report indicating the
Discounted Value for all assets of the Trust is less than the Basic
Maintenance Amount, as of the relevant Valuation Date.

                           (C) Within ten Business Days after the date of
delivery of a Basic Maintenance Report in accordance with paragraph
9(a)(ii)(B) relating to any Annual Valuation Date, the Trust shall cause the
Independent Accountant to send an Accountant's Confirmation to each Rating
Agency with respect to such Basic Maintenance Report.



                           (D) Within ten Business Days after the date of
delivery of a Basic Maintenance Report in accordance with paragraph
9(a)(ii)(B) relating to each, if any, Valuation Date on which the Trust failed
to satisfy the Basic Maintenance Amount and the Basic Maintenance Amount Cure
Date with respect to such failure to satisfy the Basic Maintenance Amount, the
Trust shall cause the Independent Accountant to provide to each Rating Agency
an Accountant's Confirmation as to such Basic Maintenance Report.

                           (E) If any Accountant's Confirmation delivered
pursuant to paragraph (C) or (D) of this paragraph 9(a)(ii) does not agree
with the Trust's calculation of the Basic Maintenance Report for a particular
Valuation Date for which such Accountant's Confirmation was required to be
delivered, or shows that a lower aggregate Discounted Value for the aggregate
Eligible Assets in respect of any Rating Agency than was determined by the
Trust, the calculation or determination made by such Independent Accountant
shall be final and conclusive and shall be binding on the Trust, and the Trust
shall accordingly amend and deliver the Basic Maintenance Report to the
relevant Rating Agency promptly following receipt by the Trust of such
Accountant's Confirmation.

                           (F) On or before 5:00 p.m., New York City time, on
the fifth Business Day after the Date of Original Issue of Series B Preferred
Shares, the Trust shall complete and deliver to each Rating Agency a Basic
Maintenance Report as of the close of business on such Date of Original Issue.

                           (G) On or before 5:00 p.m., New York City time, on
the fifth Business Day after either (1) the Trust shall have redeemed Series B
Preferred Shares or (2) the ratio of the Discounted Value of Eligible Assets
in respect of any Rating Agency to the Basic Maintenance Amount is less than
or equal to 110%, the Trust shall complete and deliver to each Rating Agency,
a Basic Maintenance Report as of the date of either such event.

                           (H) As for any Valuation Date for which the Trust's
ratio of the Discounted Value of Eligible Assets in respect of any Rating
Agency to the Basic Maintenance Amount is less than or equal to 110%, the
Trust shall deliver, by fax or email before 5:00 p.m. New York City time on
the first Business Day following such Valuation Date, notice of such ratio to
each Rating Agency.

                  (b) Failure to Meet Asset Coverage Requirements.

                  If the Trust fails to have Asset Coverage as provided in
paragraph 9(a)(i)(A) or to have Eligible Assets having an Adjusted Value at
least equal to the Basic Maintenance Amount as provided in paragraph
9(a)(ii)(A) and such failure is not cured by the applicable Cure Date,
Preferred Shares, which at the Trust's determination (to the extent permitted
by the 1940 Act and Delaware law) may include any proportion of Series B
Preferred Shares, will be subject to mandatory redemption as set forth in
paragraph 3.

                  (c) Status of Series B Preferred Shares Called for
Redemption.

                  For purposes of determining whether the requirements of
paragraphs 9(a)(i)(A) and 9(a)(ii)(A) hereof are satisfied, (i) no Series B
Preferred Share or other Preferred Share shall be deemed to be Outstanding for
purposes of any computation if, prior to or concurrently with such
determination, sufficient Deposit Assets to pay the full Redemption Price for
such share shall have been deposited in trust with the Paying Agent (or
applicable dividend-disbursing agent) and the requisite Notice of Redemption
shall have been given, and (ii) such Deposit Assets deposited with the Paying
Agent (or dividend-disbursing agent) shall not be included.

                  (d) Certain Notifications Relating to Market Value.

                  In the event the Market Value of an Eligible Asset is
determined pursuant to clause (a)(iii) of the definition of Market Value set
forth in paragraph 13, the Trust shall promptly inform each Rating Agency in
writing (which notice may be by facsimile or other electronic means) of the
basis upon which the Market Value of such Eligible Asset was determined.

10. Certain Other Restrictions.

                  (a) For so long as the Series B Preferred are rated by a
Rating Agency at the Trust's request, the Trust will not, and will cause the
Adviser not to, (i) knowingly and willfully purchase or sell any asset for the
specific purpose of causing, and with the actual knowledge that the effect of
such purchase or sale will be to cause, the Trust to have Eligible Assets
having an Adjusted Value as of the date of such purchase or sale to be less
than the Basic Maintenance Amount as of such date, (ii) in the event that, as
of the immediately preceding Valuation Date, the Adjusted Value of the Trust's
Eligible Assets exceeded the Basic Maintenance Amount by 5% or less, alter the
composition of the Trust's assets in a manner rea sonably expected to reduce
the Adjusted Value of the Trust's Eligible Assets, unless the Trust shall have
confirmed that, after giving effect to such alteration, the Adjusted Value of
the Trust's Eligible Assets exceeded the Basic Maintenance Amount or (iii)
declare or pay any dividend or other distribution on any Common Shares or
repurchase any Common Shares, unless the Trust shall have confirmed that,
after giving effect to such declaration, other distribution or repurchase, the
Trust continued to satisfy the requirements of paragraph 9(a)(ii).

                  (b) For so long as the Series B Preferred Shares are rated
by any Rating Agency at the Trust's request, unless the Trust shall have
received written confirmation from each such Rating Agency, the Trust may
engage in the lending of its portfolio securities only in an amount of up to
20% of the Trust's total assets, provided that the Trust receives cash
collateral for such loaned securities that is maintained at all times in an
amount equal to at least 100% of the then current market value of the loaned
securities and, if invested, is invested only in Short-Term Money Market
Instruments or in money market mutual funds meeting the require ments of Rule
2a-7 under the 1940 Act that maintain a constant $1.00 per share net asset
value and treat the loaned securities rather than the collateral as the assets
of the Trust for purposes of determining compliance with paragraph 9.

                  (c) For so long as the Series B Preferred Shares are rated
by any Rating Agency at the Trust's request, the Trust shall not consolidate
with, merge into, sell or otherwise transfer all or substantially all of its
assets to another Person or adopt a plan of liquidation of the Trust, in each
case without providing prior written notification to each Rating Agency.

11.  Limitation on Incurrence of Additional Indebtedness, Certain Transactions
and Issuance of Additional Preferred Shares

                  (a) So long as the Series B Preferred Shares are
Outstanding, the Trust may issue and sell one or more series of a class of
senior securities of the Trust representing indebtedness under Section 18 of
the 1940 Act and/or otherwise create or incur indebtedness, provided that
immediately after giving effect to the incurrence of such indebtedness and to
its receipt and application of the proceeds thereof, the Trust shall have an
"asset coverage" for all senior securities representing indebtedness, as
defined in Section 18(h) of the1940 Act, of at least 300% of the amount of all
indebtedness of the Trust then Outstanding and no such additional indebtedness
shall have any preference or priority over any other indebtedness of the Trust
upon the distribution of the assets of the Trust upon the distribution of the
assets of the Trust or in respect of the payment of interest. Any possible
liability resulting from lending and/or borrowing portfolio securities,
entering into reverse repurchase agreements, entering into futures contracts
and writing options, to the extent such transactions are made in accordance
with the investment restrictions of the Trust then in effect, shall not be
considered to be indebtedness limited by this paragraph 11(a).

                  (b) So long as any Series B Preferred Shares are Outstanding
and S&P is rating such Series B Preferred Shares at the Trust's request, the
Trust will not, unless it has received written confirmation that any such
transaction would not impair the rating then assigned by S&P to such Series B
Preferred Shares, engage in any one or more of the following transactions:

                           (i) purchase or sell futures contracts; write,
purchase or sell options on futures contracts; or write put options (except
covered put options) or call options (except covered call options) on
securities owned by the Trust (collectively, "S&P Hedging Transactions"),
except subject to the following limitations:

                           (A) for each net long or short position in S&P
Hedging Transactions, the Trust will maintain in a segregated account with the
Trust's custodian or with the counterparty to such S&P Hedging Transaction an
amount of cash or readily marketable securities having a value, when added to
any amounts on deposit with the Trust's futures commission merchants or
brokers as margin or premium for such position, at least equal to the market
value of the Trust's potential obligations on such position, marked-to-market
on a daily basis, in each case as and to the extent required by the applicable
rules or orders of the Commission or by interpretations of the Commission's
staff;

                           (B) the Trust will not engage in any S&P Hedging
Transaction which would cause the Trust at the time of such transaction to own
or have sold the lesser of (1) outstanding futures contracts, in aggregate,
based on the Standard & Poor's 500 Index, the Dow Jones Industrial Average,
the Russell 2000 Index, the Wilshire 5000 Index, the Nasdaq Composite Index
and the New York Stock Exchange Composite Index (or any component of any of
the forgoing) exceeding in number 50% of the market value of the Trust's total
assets or (2) outstanding futures contracts based on any of the aforementioned
indices exceeding in number 10% of the average number of daily traded futures
contracts based on such index in the 30 days preceding the time of effecting
such transaction as reported by The Wall Street Journal;

                           (C) the Trust will engage in closing transactions
to close out any outstanding futures contract which the Trust owns or has sold
or any outstanding option thereon owned by the Trust in the event (1) the
Trust does not have S&P Eligible Assets with an aggregate Discounted Value
equal to or greater than the Series B Preferred Basic Maintenance Amount on
two consecutive Valuation Dates and (2) the Trust is required to pay variation
margin on the second such Valuation Date;

                           (D) the Trust will engage in a closing transaction
to close out any outstanding futures contract or option thereon at least one
week prior to the delivery date under the terms of the futures contract or
option thereon unless the Trust holds the securities deliverable under such
terms; and

                           (E) when the Trust writes a futures contract or
option thereon, either the amount of margin posted by the Trust (in the case
of a futures contract) or the marked-to-market value of the Trust's obligation
(in the case of a put option written by the Trust) shall be treated as a
liability of the Trust for purposes of calculating the Series B Preferred
Basic Maintenance Amount, or, in the event the Trust writes a futures contract
or option thereon which requires delivery of an underlying security and the
Trust does not wish to treat its obligations with respect thereto as a
liability for purposes of calculating the Series B Preferred Basic Maintenance
Amount, it shall hold such underlying security in its portfolio and shall not
include such security to the extent of such contract or option as an S&P
Eligible Asset.

                           (ii) borrow money, except for the purpose of
clearing securities transactions if (A) the Series B Preferred Basic
Maintenance Amount would continue to be satisfied after giving effect to such
borrowing and (B) such borrowing (1) is privately arranged with a bank or
other person and is not intended to be publicly distributed or (2) is for
"temporary purposes," and is in an amount not exceeding 5 percent of the
market value of the total assets of the Trust at the time of the borrowing;
for purposes of the foregoing, "temporary purposes" means that the borrowing
is to be repaid within sixty days and is not to be extended or renewed;

                           (iii) engage in any short sales of equity
securities (other than short sales against the box) unless the Trust maintains
in a segregated account with the Trust's custodian an amount of cash or other
readily marketable securities having a market value, when added to any amounts
on deposit with the Trust's broker as collateral for its obligation to replace
the securities borrowed and sold short, at least equal to the current market
value of securities sold short, marked-to-market on a daily basis;

                           (iv) utilize any pricing service other than a
Pricing Service or such other pricing service then permitted by S&P; or

                           (v) enter into any reverse repurchase agreement,
other than with a counterparty that is rated at least A-1+ by S&P.

                  (c) So long as any Series B Preferred Shares are
Outstanding, the Trust may issue and sell shares of one or more other series
of Preferred Stock constituting a series of a class of senior securities of
the Trust representing stock under Section 18 of the 1940 Act in addition to
the Series B Preferred Shares and other Preferred Stock then Outstanding,
provided that (i) the Trust shall, immediately after giving effect to the
issuance of such additional Preferred Stock and to its receipt and application
of the proceeds thereof, have an "asset coverage" for all senior securities
which are stock, as defined in Section 18(h) of the 1940 Act, of at least 200%
of the Series B Preferred Shares and all other Preferred Stock of the Trust
then Outstanding, and (ii) no such additional Preferred Stock (including any
additional Series B Preferred Shares) shall have any preference or priority
over any other Preferred Stock of the Trust upon the distribution of the
assets of the Trust or in respect of the payment of dividends.

12.      Termination.

         In the event that no Series B Preferred Shares are Outstanding, all
rights and preferences of such shares established and designated hereunder
shall cease and terminate, and all obligations of the Trust under this
Statement of Preferences shall terminate.

13.      Definitions.

         Unless the context or use indicates another or different meaning or
intent, each of the following terms when used in this Statement of Preferences
shall have the meaning ascribed to it below, whether such term is used in the
singular or plural and regardless of tense:

         "Accountant's Confirmation" means a letter from an Independent
Accountant delivered to each Rating Agency with respect to certain Basic
Maintenance Reports substantially to the effect that:

         (a) the Independent Accountant has read the Basic Maintenance Report
or Reports prepared by the Administrator during the referenced calendar year
that are referred to in such letter;

         (b) with respect to the issue size compliance, issuer diversification
and industry diversification calculations, such calculations and the resulting
Market Value of the relevant Eligible Assets included in the Reports and the
Adjusted Value of the such Eligible Assets included in the Reports are
numerically correct;

         (c) with respect to the excess or deficiency of the Adjusted Value of
the relevant Eligible Assets included in the Reports when compared to the
Basic Maintenance Amount calculated for such Rating Agency the results of the
calculation set forth in the Reports have been recalculated and are
numerically correct;

         (d) with respect to the Rating Agency ratings on corporate evidences
of indebtedness, convertible corporate evidences of indebtedness and preferred
stock listed in the Reports, that information has been traced and agrees with
the information provided directly or indirectly by the respective Rating
Agencies (in the event such information does not agree or such information is
not listed in the accounting records of the Trust, the Independent Accountants
will inquire of the Rating Agencies what such information is and provide a
listing in their letter of such differences, if any);

         (e) with respect to issuer name and coupon or dividend rate listed in
the Reports, that information has been traced and agrees with information
listed in the accounting records of the Trust;

         (f) with respect to issue size listed in the Reports, that
information has been traced and agrees with information provided by a Pricing
Service or such other services as the relevant Rating Agency may authorize
from time to time;

         (g) with respect to the prices (or alternative permissible factors
used in calculating the Market Value as provided by this Statement of
Preferences) provided by the Administrator of the Trust's assets for purposes
of valuing securities in the portfolio, the Independent Accountant has traced
the price used in the Reports to the price provided by such Administrator (in
accordance with the procedures provided in this Statement of Preferences) and
verified that such information agrees (in the event such information does not
agree, the Independent Accountants will provide a listing in their letter of
such differences); and

         (h) with respect to the description of each security included in the
Reports, the description of the relevant Eligible Assets has been compared to
the definition of such Rating Agency's Eligible Assets contained in this
Statement of Preferences, and the description as appearing in the Reports
agrees with the definition of such Rating Agency's Eligible Assets as
described in this Statement of Preferences.

         Each such letter may state that: (i) such Independent Accountant has
made no independent verification of the accuracy of the description of the
investment securities listed in the Reports or the Market Value of those
securities nor has it performed any procedures other than those specifically
outlined above for the purposes of issuing such letter; (ii) unless otherwise
stated in the letter, the procedures specified therein were limited to a
comparison of numbers or a verification of specified computations applicable
to numbers appearing in the Reports and the schedule(s) thereto; (iii) the
foregoing procedures do not constitute an examination in accordance with
generally accepted auditing standards and the Reports contained in the letter
do not extend to any of the Trust's financial statements taken as a whole;
(iv) such Independent Accountant does not express an opinion as to whether
such procedures would enable such Independent Accountant to determine that the
methods followed in the preparation of the Reports would correctly determine
the Market Value or Discounted Value of the investment portfolio; and (v)
accordingly, such Independent Accountant expresses no opinion as to the
information set forth in the Reports or in the schedule(s) thereto and makes
no representation as to the sufficiency of the procedures performed for the
purposes of this Statement of Preferences; and such other statements as are
acceptable to the Rating Agencies.

                  Such letter shall also state that the Independent Accountant
is an "independent accountant" with respect to the Trust within the meaning of
the 1933 Act and the related published rules and regulations thereunder.

         "Adjusted Value" of each Eligible Asset shall be computed as follows:

                  (a) cash shall be valued at 100% of the face value thereof;
and

                  (b) all other Eligible Assets shall be valued at the
applicable Discounted Value thereof; and

                  (c) each asset that is not an Eligible Asset shall be valued
at zero.

         "Administrator" means the other party to the Administration Agreement
with the Trust which shall initially be Gabelli Funds, LLC, a New York limited
liability company, and will include, as appropriate, any sub-administrator
appointed by the Administrator.

         "ADRs" means U.S. dollar-denominated American Depository Receipts.

         "Adviser" means Gabelli Funds, LLC, a New York limited liability
company, or such other Person that is then serving as the investment adviser
of the Trust.

         "Affiliate" means, with respect to the Auction Agent, any person
known to the Auction Agent to be controlled by, in control of or under common
control with the Trust; provided, however, that no Broker-Dealer controlled
by, in control of or under common control with the Trust shall be deemed to be
an Affiliate nor shall any corporation or any Person controlled by, in control
of or under common control with such corporation, one of the directors or
executive officers of which is a trustee of the Trust be deemed to be an
Affiliate solely because such trustee or executive officer is also a trustee
of the Trust.

         "All Hold Rate" means 90% of the Reference Rate.

         "Annual Valuation Date" means the Valuation Date each calendar year
so designated by the Trust, commencing in the calendar year 2003.

         "Applicable Rate" means, with respect to the Series B Preferred
Shares, for each Dividend Period (i) if Sufficient Clearing Bids exist for the
Auction in respect thereof, the Winning Bid Rate, (ii) if Sufficient Clearing
Orders do not exist for the Auction in respect thereof, or an Auction does not
take place with respect to such Dividend Period because of the commencement of
a Default Period, the Maximum Rate and (iii) if all Series B Preferred Shares
are the subject of Submitted Hold Orders for the Auction in respect thereof,
the All Hold Rate.

         "Asset Coverage" means asset coverage, as determined in accordance
with Section 18(h) of the 1940 Act, of at least 200% with respect to all
outstanding senior securities of the Trust which are stock, including all
Outstanding Series B Preferred Shares (or such other asset coverage as may in
the future be specified in or under the 1940 Act as the minimum asset coverage
for senior securities which are stock of a closed-end investment company as a
condition of declaring dividends on its common stock), determined on the basis
of values calculated as of a time within 48 hours (not including Saturdays,
Sundays or holidays) next preceding the time of such determination.

         "Asset Coverage Certificate" means the certificate required to be
delivered by the Trust pursuant to paragraph 9(a)(i)(B) of Part I of this
Statement of Preferences.

         "Auction" means each periodic operation of the Auction Procedures.

         "Auction Agent" means The Bank of New York unless and until another
commercial bank, trust company, or other financial institution appointed by a
resolution of the Board of Trustees enters into an agreement with the Trust to
follow the Auction Procedures for the purpose of determining the Applicable
Rate.

         "Auction Date" means the last day of the initial Dividend Period and
each seventh day after the immediately preceding Auction Date; provided,
however, that if any such seventh day is not a Business Day, such Auction Date
shall be the first preceding day that is a Business Day and the next Auction
Date, if for a Standard Dividend Period, shall (subject to the same
advancement procedure) be the seventh day after the date that the preceding
Auction Date would have been if not for the advancement procedure; provided
further, however, that the Auction Date for the Auction at the conclusion of
any Special Dividend Period shall be the last Business Day in such Special
Dividend Period and that no more than one Auction shall be held during any
Dividend Period; provided further, however, that the Auction Date following a
Default Period shall be the last Business Day in the Standard Dividend Period
that commenced during such Default Period. Notwithstanding the foregoing, in
the event an auction is not held because an unforeseen event or unforeseen
events cause a day that otherwise would have been an Auction Date not to be a
Business Day, then the length of the then current dividend period will be
extended by seven days (or a multiple thereof if necessary because of such
unforeseen event or events).

         "Auction Procedures" means the procedures for conducting Auctions as
set forth in Part II of this Statement of Preferences.

         "Basic Maintenance Amount" means, with respect to the Series B
Preferred Shares, as of any Valuation Date, the dollar amount equal to (a) the
sum of (i) the product of the number of shares of each class or series of
Preferred Shares Outstand ing on such Valuation Date multiplied, in the case
of each such series or class, by the per share Liquidation Preference
applicable to each such series or class; (ii) to the extent not included in
(i) the aggregate amount of cash dividends (whether or not earned or declared)
that will have accumulated for each Outstanding Preferred Share from the most
recent applicable dividend payment date to which dividends have been paid or
duly provided for (or, in the event the Basic Maintenance Amount is calcu
lated on a date prior to the initial Dividend Payment Date with respect to a
class or series of the Preferred Shares, then from the Date of Original Issue
of such shares) through the Valuation Date plus all dividends to accumulate on
the Preferred Shares then Outstanding during the 31 days following such
Valuation Date or, if less, during the number of days following such Valuation
Date that the Preferred Shares called for redemption are scheduled to remain
Outstanding at the applicable rate or default rate then in effect with respect
to such shares; (iii) the Trust's other liabilities due and payable as of such
Valuation Date (except that dividends and other distributions payable by the
Trust on Common Shares shall not be included as a liability) and such
liabilities projected to become due and payable by the Trust during the 90
days following such Valuation Date (excluding liabilities for investments to
be purchased and for dividends and other distributions not declared as of such
Valuation Date); and (iv) any current liabilities of the Trust as of such
Valuation Date to the extent not reflected in (or specifically excluded by)
any of (a)(i) through (a)(iii) (including, without limitation, and immediately
upon determination, any amounts due and payable by the Trust pursuant to
reverse repurchase agreements and any payables for assets purchased as of such
Valuation Date) less (b) (i) the Adjusted Value of any of the Trust's assets
or (ii) the face value of any of the Trust's assets if, in the case of both
(b)(i) and (b)(ii), such assets are either cash or evidences of indebtedness
which mature prior to or on the date of redemption or repurchase of Preferred
Shares or payment of another liability and are either U.S. Government
Obligations or evidences of indebtedness which have a rating assigned by
Moody's of at least Aaa, P-1, VMIG-1 or MIG-1 or by S&P of at least AAA, SP-1+
or A-1+, and are irrevocably held by the Trust's custodian bank in a
segregated account or deposited by the Trust with the dividend-disbursing
agent or Paying Agent, as the case may be, for the payment of the amounts
needed to redeem or repurchase Preferred Shares subject to redemption or
repurchase or any of (a)(ii) through (a)(iv); and provided that in the event
the Trust has repurchased Preferred Shares and irrevocably segregated or
deposited assets as described above with its custodian bank, the
dividend-disbursing agent or Paying Agent for the payment of the repurchase
price the Trust may deduct 100% of the Liquidation Preference of such
Preferred Shares to be repurchased from (a) above. Basic Maintenance Amount
shall, for the purposes of this Statement of Preferences, have a correlative
meaning with respect to any other class or series of Preferred Shares.

         "Basic Maintenance Amount Cure Date" means, with respect to the
Series B Preferred Shares, 10 Business Days following a Valuation Date, such
date being the last day upon which the Trust's failure to comply with
paragraph 9(a)(ii)(A) of Part I of this Statement of Preferences could be
cured, and shall, for the purposes of this Statement of Preferences, have a
correlative meaning with respect to any other class or series of Preferred
Shares.

         "Basic Maintenance Test" means, with respect to the Series B
Preferred Shares, a test which is met if the lower of the aggregate Discounted
Values of the Moody's Eligible Assets or the S&P Eligible Assets if both
Moody's and S&P are then rating the Series B Preferred Shares at the request
of the Trust, or the Eligible Assets of whichever of Moody's or S&P is then
doing so if only one of Moody's or S&P is then rating the Series B Preferred
Shares at the request of the Trust, meets or exceeds the Basic Maintenance
Amount.

         "Basic Maintenance Report" or "Report" means, with respect to the
Series B Preferred Shares, a report prepared by the Administrator which sets
forth, as of the related Monthly Valuation Date, (i) Moody's Eligible Assets
and S&P Eligible Assets sufficient to meet or exceed the Basic Maintenance
Amount, (ii) the Market Value and Discounted Value thereof (seriatim and in
the aggregate), (iii) the Basic Maintenance Amount, and (iv) the net asset
value of the Trust. Such report will also include (A) the month-end closing
price for the Common Shares of the Trust (B) the monthly total-return per
Common Shares, which will be determined based upon month-end closing share
prices, assuming reinvestment of all dividends paid during such month and (C)
the total leverage position of the Trust. For the purposes of this Statement
of Preferences, "Basic Maintenance Report" or "Report" shall have a
correlative meaning with respect to any other class or series of Preferred
Shares.

         "Beneficial Owner," with respect to the Series B Preferred Shares,
means a customer of a Broker-Dealer who is listed on the records of that
Broker-Dealer (or, if applicable, the Auction Agent) as a holder of Series B
Preferred Shares.

         "Bid" has the meaning set forth in paragraph 2(a) of Part II of this
Statement of Preferences.

         "Bidder" has the meaning set forth in paragraph 2(a) of Part II of
this Statement of Preferences, provided however that neither the Trust nor any
Affiliate shall be permitted to be Bidder in an Auction.

         "Board of Trustees" or "Board" means the Board of Trustees of the
Trust or any duly authorized committee thereof as permitted by applicable law.

         "Broker-Dealer" means any broker-dealer or broker-dealers, or other
entity permitted by law to perform the functions required of a Broker-Dealer
by the Auction Procedures, that has been selected by the Trust and has entered
into a Broker-Dealer Agreement that remains effective.

         "Broker-Dealer Agreement" means an agreement between the Auction
Agent and a Broker-Dealer, pursuant to which such Broker-Dealer agrees to
follow the Auction Procedures.

         "Business Day" means a day on which the New York Stock Exchange is
open for trading and which is not a Saturday, Sunday or other day on which
banks in The City of New York, New York are authorized or obligated by law to
close.

         "By-Laws" means the By-Laws of the Trust, as amended from time to
time.

         "Commission" means the Securities and Exchange Commission.

         "Common Shares" means the Trust's common shares, par value $.001 per
share.

         "Cure Date" has the meaning set forth in paragraph 3(a)(ii) of Part I
of this Statement of Preferences.

         "Date of Original Issue" means [ ], and, for the purposes of this
Statement of Preferences, shall have a correlative meaning with respect to any
other class or series of Preferred Shares.

         "Declaration" means the Agreement and Declaration of Trust of the
Trust, dated February 25, 1999, as amended and restated from time to time
(including by this Statement of Preferences or by way of any other supplement
or Statement of Preferences authorizing or creating a class of shares of
beneficial interest in the Trust).

         "Default" means a Dividend Default or a Redemption Default.

         "Default Period" means a Dividend Default or a Redemption Default.

         "Default Rate" has the meaning set forth in paragraph 2(c)(iii) of
Part I of this Statement of Preferences.

         "Deposit Assets" means cash, Short-Term Money Market Instruments and
U.S. Government Obligations. Except for determining whether the Trust has
Eligible Assets with an Adjusted Value equal to or greater than the Basic
Maintenance Amount, each Deposit Asset shall be deemed to have a value equal
to its principal or face amount payable at maturity plus any interest payable
thereon after delivery of such Deposit Asset but only if payable on or prior
to the applicable payment date in advance of which the relevant deposit is
made.

         "Discount Factor" means (a) so long as Moody's is rating the Series B
Preferred Shares at the Trust's request, the Moody's Discount Factor, (b) so
long as S&P is rating the Series B Preferred Shares at the Trust's request,
the S&P Discount Factor, and/or (c) any applicable discount factor established
by any Other Rating Agency, whichever is applicable.

         "Discounted Value" means, as applicable, (a) the quotient of the
Market Value of an Eligible Asset divided by the applicable Discount Factor or
(b) such other formula for determining the discounted value of an Eligible
Asset as may be established by an applicable Rating Agency, provided, in
either case that with respect to an Eligible Asset that is currently callable,
Discounted Value will be equal to the applicable quotient or product as
calculated above or the call price, whichever is lower, and that with respect
to an Eligible Asset that is prepayable, Discounted Value will be equal to the
applicable quotient or product as calculated above or the par value, whichever
is lower.

         "Dividend Default" has the meaning set forth in paragraph 2(c)(ii) of
Part I of this Statement of Preferences.

         "Dividend Payment Date" means with respect to the Series B Preferred
Shares, any date on which dividends declared by the Board of Trustees thereon
are payable pursuant to the provisions of paragraph 2(b) of Part I of this
Statement of Preferences and shall for the purposes of this Statement of
Preferences have a correlative meaning with respect to any other class or
series of Preferred Shares.

         "Dividend Period" means, with respect to Series B Preferred Shares,
the initial period determined in the manner set forth under "Designation"
above, and thereafter, the period commencing on the Business Day following
each Auction Date and ending on the next Auction Date or, if such next Auction
Date is not immediately followed by a Business Day, on the latest day prior to
the next succeeding Business Day, and shall, for the purposes of this
Statement of Preferences, have a correlative meaning with respect to any other
class or series of Preferred Shares.

         "Eligible Assets" means Moody's Eligible Assets (if Moody's is then
rating the Series B Preferred Shares at the request of the Trust), S&P
Eligible Assets (if S&P is then rating the Series B Preferred Shares at the
request of the Trust), and/or Other Rating Agency Eligible Assets if any Other
Rating Agency is then rating the Series A Preferred or Series B AMPS,
whichever is applicable.

         "Governing Documents" means the Declaration and the By-Laws.

         "Holder" means, with respect to the Preferred Shares, including the
Series B Preferred Shares, the registered holder of such shares as the same
appears on the stock ledger or ownership records of the Trust or records of
the Auction Agent, as the case may be.

         "Independent Accountant" means a nationally recognized accountant, or
firm of accountants, that is with respect to the Trust an independent public
accountant or firm of independent public accountants under the 1933 Act.

         "Industry Classification" means a six-digit industry classification
in the Standard Industry Classification system published by the United States.

         "LIBOR Dealers" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated and such other dealer or dealers as the Trust may from time to
time appoint, or, in lieu of any thereof, their respective affiliates or
successors.

         "LIBOR Rate," on any Auction Date, means (i) the rate for deposits in
U.S. dollars for the designated Dividend Period, which appears on display page
3750 of Moneyline's Telerate Service ("Telerate Page 3750") (or such other
page as may replace that page on that service, or such other service as may be
selected by the LIBOR Dealer or its successors that are LIBOR Dealers) as of
11:00 a.m., London time, on the day that is the London Business Day preceding
the Auction Date (the "LIBOR Determination Date"), or (ii) if such rate does
not appear on Telerate Page 3750 or such other page as may replace such
Telerate Page 3750, (A) the LIBOR Dealer shall determine the arithmetic mean
of the offered quotations of the Reference Banks to leading banks in the
London interbank market for deposits in U.S. dollars for the designated
Dividend Period in an amount determined by such LIBOR Dealer by reference to
requests for quotations as of approximately 11:00 a.m. (London time) on such
date made by such LIBOR Dealer to the Reference Banks, (B) if at least two of
the Reference Banks provide such quotations, LIBOR Rate shall equal such
arithmetic mean of such quotations, (C) if only one or none of the Reference
Banks provide such quotations, LIBOR Rate shall be deemed to be the arithmetic
mean of the offered quotations that leading banks in The City of New York
selected by the LIBOR Dealer (after obtaining the Trust's approval) are
quoting on the relevant LIBOR Determination Date for deposits in U.S. dollars
for the designated Dividend Period in an amount determined by the LIBOR Dealer
(after obtaining the Trust's approval) that is representative of a single
transaction in such market at such time by reference to the principal London
offices of leading banks in the London interbank market; provided, however,
that if one of the LIBOR Dealers does not quote a rate required to determine
the LIBOR Rate, the LIBOR Rate will be determined on the basis of the
quotation or quotations furnished by any Substitute LIBOR Dealer or Substitute
LIBOR Dealers selected by the Trust to provide such rate or rates not being
supplied by the LIBOR Dealer; provided further, that if the LIBOR Dealer and
Substitute LIBOR Dealers are required but unable to determine a rate in
accordance with at least one of the procedures provided above, LIBOR Rate
shall be LIBOR Rate as determined on the previous Auction Date. If the number
of Dividend Period days shall be (1) 7 or more but fewer than 21 days, such
rate shall be the seven-day LIBOR rate; (2) more than 21 but fewer than 49
days, such rate shall be one-month LIBOR rate; (3) 49 or more but fewer than
77 days, such rate shall be the two-month LIBOR rate; (4) 77 or more but fewer
than 112 days, such rate shall be the three-month LIBOR rate; (5) 112 or more
but fewer than 140 days, such rate shall be the four-month LIBOR rate; (6) 140
or more but fewer than 168 days, such rate shall be the five-month LIBOR rate;
(7) 168 or more but fewer than 189 days, such rate shall be the six-month
LIBOR rate; (8) 189 or more but fewer than 217 days, such rate shall be the
seven-month LIBOR rate; (9) 217 or more but fewer than 252 days, such rate
shall be the eight-month LIBOR rate; (10) 252 or more but fewer than 287 days,
such rate shall be the nine-month LIBOR rate; (11) 287 or more but fewer than
315 days, such rate shall be the ten-month LIBOR rate; (12) 315 or more but
fewer than 343 days, such rate shall be the eleven-month LIBOR rate; and (13)
343 or more but fewer than 365 days, such rate shall be the twelve-month LIBOR
rate.

         "Liquidation Preference" shall, with respect to each share of Series
B Preferred Shares, have the meaning set forth in paragraph 7(a) of Part I of
this Statement of Preferences and shall, for the purposes of this Statement of
Preferences, have a correlative meaning with respect to any other class or
series of Preferred Shares.

         "London Business Day" means any day on which commercial banks are
generally open for business in London.

         "Mandatory Redemption Date" has the meaning set forth in paragraph
3(a)(iii) of Part I of this Statement of Preferences.

         "Market Value" means the amount determined by the Trust with respect
to specific Eligible Assets in accordance with valuation policies adopted from
time to time by the Board of Trustees as being in compliance with the
requirements of the 1940 Act.

                  Notwithstanding the foregoing, "Market Value" may, at the
option of the Trust with respect to any of its assets, mean the amount
determined with respect to specific Eligible Assets of the Trust in the manner
set forth below:

                  (a) as to any common or preferred stock which is an Eligible
Asset, (i) if the stock is traded on a national securities exchange or quoted
on the Nasdaq System, the last sales price reported on the Valuation Date,
(ii) if there was no such reported sales price, the price reported by a
recognized pricing service or (iii) if there was no such pricing service
report, the lower of two bid prices for such stock provided to the
Administrator by two recognized securities dealers with minimum
capitalizations of $25,000,000 (or otherwise approved for such purpose by
Moody's and S&P), at least one of which shall be provided in writing or by
telecopy, telex, other electronic transcription, computer obtained quotation
reducible to written form or similar means, and in turn provided to the Trust
by any such means by such Administrator, or, if two bid prices cannot be
obtained, such Eligible Asset shall have a Market Value of zero;

                  (b) as to any U.S. Government Obligation, Short-Term Money
Market Instrument (other than demand deposits, federal funds, bankers'
acceptances and next Business Day repurchase agreements) and commercial paper,
with a matu rity of greater than 60 days, the product of (i) the principal
amount (accreted princi pal to the extent such instrument accretes interest)
of such instrument and (ii) the lower of the bid prices for the same kind of
instruments having, as nearly as practica ble, comparable interest rates and
maturities provided by two recognized securities dealers having minimum
capitalization of $25,000,000 (or otherwise approved for such purpose by
Moody's and S&P) to the Administrator, at least one of which shall be provided
in writing or by telecopy, telex, other electronic transcription, computer
obtained quotation reducible to written form or similar means, and in turn
provided to the Trust by any such means by such Administrator, or, if two bid
prices cannot be obtained, such Eligible Asset will have a Market Value of
zero;

                  (c) as to cash, demand or time deposits, federal funds,
bankers' acceptances and next Business Day repurchase agreements included in
Short-Term Money Market Instruments, the face value thereof;

                  (d) as to any U.S. Government Obligation, Short-Term Money
Market Instrument or commercial paper with a maturity of 60 days or fewer,
amortized cost unless the Board of Trustees determines that such value does
not constitute fair value;

                  (e) as to any other evidence of indebtedness which is an
Eligible Asset, (i) the product of (A) the unpaid principal balance of such
indebtedness as of the Valuation Date and (B)(1) if such indebtedness is
traded on a national securities exchange or quoted on the Nasdaq System, the
last sales price reported on the Valuation Date or (2) if there was no
reported sales price on the Valuation Date or if such indebtedness is not
traded on a national securities exchange or quoted on the Nasdaq System, the
lower of two bid prices for such indebtedness provided by two recognized
dealers with a minimum capitalization of $25,000,000 (or otherwise approved
for such purpose by Moody's and S&P) to the Administrator, at least one of
which shall be provided in writing or by telecopy, telex, other electronic
transcrip tion, computer obtained quotation reducible to written form or
similar means, and in turn provided to the Trust by any such means by such
Administrator, plus (ii) accrued interest on such indebtedness.

         "Maximum Rate" means, on any day on which the Applicable Rate is
determined, the greater of (as set forth in the table below) (i) the
applicable percentage of the Reference Rate or (ii) the applicable spread plus
the Reference Rate. The reference rate is the applicable LIBOR Rate (for a
dividend period or a special dividend period of fewer than 364 days), or the
applicable Treasury Index Rate (for a special dividend period of 364 days or
more). The applicable percentage and applicable spread will be determined
based on the lower of the credit ratings assigned to the Series B AMPS by
Moody's and S&P. If Moody's and S&P or both do not make such ratings
available, the rate will be determined by reference to equivalent ratings
issued by a substitute rating agency.

<TABLE>
<CAPTION>

                                                              Applicable      Applicable
     Moody's Credit Rating           S&P Credit Rating        Percentage        Spread
     ---------------------           -----------------        ----------        ------
<S>                                  <C>                     <C>              <C>
              Aaa                           AAA                  125%          125 bps
           Aa3 to Aa1                    AA- to AA+              150%          150 bps
            A3 to A1                      A- to A+               200%          200 bps
          Baa3 to Baa1                  BBB- to BBB+             250%          250 bps
           Below Baa3                    Below BBB-              300%          300 bps
</TABLE>

         "Monthly Valuation Date" means the last Valuation Date of each
calendar month.

         "Moody's" means Moody's Investors Service, Inc. and its successors at
law.

         "Moody's Discount Factor" means, with respect to a Moody's Eligible
Asset specified below, the following applicable number:

<TABLE>
<CAPTION>

                                                                                  Moody's
Type of Moody's Eligible Asset:                                               Discount Factor:
-------------------------------                                               ----------------

<S>                                                                           <C>
Short Term Money Market Instruments (other than U.S. Government Obligations
set forth below) and other commercial paper:
     U.S. Treasury Securities with final maturities that are less
     than or equal to 60 days........................................                    1.00
     Demand or time deposits, certificates of deposit and bankers'
     acceptances includible in Moody's Short Term Money Market
     Instruments.....................................................                    1.00
     Commercial paper rated P-1 by Moody's maturing in 30 days
     or less.........................................................                    1.00
     Commercial paper rated P-1 by Moody's maturing in more
     than 30 days but in 270 days or less............................                    1.15
     Commercial paper rated A-1+ by S&P maturing in 270 days
     or less.........................................................                    1.25
     Repurchase obligations includible in Moody's Short Term
     Money Market Instruments if term is less than 30 days and
     counterparty is rated at least A2...............................                    1.00
     Other repurchase obligations....................................    Discount Factor applicable to
                                                                         the underlying assets
U.S. Common Stocks and Common Stocks of foreign issuers for
which ADRs are traded................................................
                                     Utility.........................                    1.70
                                     Industrial......................                    2.64
                                     Financial  .....................                    2.41
Common Stocks of foreign issuers (in existence for at least five
years) for which no ADRs are traded..................................                    4.00
Convertible Preferred Stocks.........................................                    3.00
Preferred stocks:
     Auction Market preferred stocks.................................                    3.50
     Other preferred stocks issued by issuers in the financial and
     industrial industries...........................................                    2.09
     Other preferred stocks issued by issuers in the utilities
     industry........................................................                    1.55
U.S. Government Obligations (other than U.S. Treasury Securities Strips set
forth below) with remaining terms to maturity of:
            1 year or less...........................................                    1.04
            2 years or less..........................................                    1.09
            3 years or less..........................................                    1.12
            4 years or less..........................................                    1.15
            5 years or less..........................................                    1.18
            7 years of less..........................................                    1.21
            10 years or less.........................................                    1.24
            15 years or less.........................................                    1.25
            20 years or less.........................................                    1.26
            30 years or less.........................................                    1.26
U.S. Treasury Securities Strips with remaining terms to maturity of:
            1 year or less...........................................                    1.04
            2 years or less..........................................                    1.10
            3 years or less..........................................                    1.14
            4 years or less..........................................                    1.18
            5 years or less..........................................                    1.21
            7 years or less..........................................                    1.27
            10 years or less.........................................                    1.34
            15 years or less.........................................                    1.45
            20 years or less.........................................                    1.54
            30 years or less.........................................                    1.66
Corporate Debt:
     Non-convertible corporate debt rated Aaa with remaining terms to maturity
     of:
         1 year or less..............................................                    1.09
         2 years or less.............................................                    1.15
         3 years or less.............................................                    1.20
         4 years or less.............................................                    1.26
         5 years or less.............................................                    1.32
         7 years or less.............................................                    1.39
         10 years or less............................................                    1.45
         15 years or less............................................                    1.50
         20 years or less............................................                    1.50
         30 years or less............................................                    1.50
     Non-convertible corporate debt rated at least Aa3 with remaining terms
     to maturity of:
         1 year or less..............................................                    1.12
         2 years of less.............................................                    1.18
         3 years or less.............................................                    1.23
         4 years or less.............................................                    1.29
         5 years or less.............................................                    1.35
         7 years or less.............................................                    1.43
         10 years or less............................................                    1.50
         15 years or less............................................                    1.55
         20 years or less............................................                    1.55
         30 years or less............................................                    1.55
     Non-convertible corporate debt rated at least A3 with remaining terms to
     maturity of:
         1 year or less..............................................                    1.15
         2 years or less.............................................                    1.22
         3 years or less.............................................                    1.27
         4 years or less.............................................                    1.33
         5 years or less.............................................                    1.39
         7 years or less.............................................                    1.47
         10 years or less............................................                    1.55
         15 years or less............................................                    1.60
         20 years or less............................................                    1.60
         30 years or less............................................                    1.60
     Non-convertible corporate debt rated at least Baa3 with remaining terms
     of maturity of:
         1 year or less..............................................                    1.18
         2 years or less.............................................                    1.25
         3 years or less.............................................                    1.31
         4 years or less.............................................                    1.38
         5 years or less.............................................                    1.44
         7 years or less.............................................                    1.52
         10 years or less............................................                    1.60
         15 years or less............................................                    1.65
         20 years or less............................................                    1.65
         30 years or less............................................                    1.65
     Non-convertible corporate debt rated at least Ba3 with remaining terms of
     maturity of:
         1 year or less..............................................                    1.37
         2 years or less.............................................                    1.46
         3 years or less.............................................                    1.56
         4 years or less.............................................                    1.61
         5 years or less.............................................                    1.68
         7 years or less.............................................                    1.79
         10 years or less............................................                    1.89
         15 years or less............................................                    1.96
         20 years or less............................................                    1.96
         30 years or less............................................                    1.96
     Non-convertible corporate debt rated at least B1 and B2 with remaining
     terms of maturity of:
         1 year or less..............................................                    1.50
         2 years or less.............................................                    1.60
         3 years or less.............................................                    1.68
         4 years or less.............................................                    1.76
         5 years or less.............................................                    1.86
         7 years or less.............................................                    1.97
         10 years or less............................................                    2.08
         15 years or less............................................                    2.16
         20 years or less............................................                    2.28
         30 years or less............................................                    2.29
     Non-convertible unrated corporate debt of any maturity..........                    2.50
Convertible corporate debt securities rated at least Aa3 issued by the
following type of issuers:
     Utility.........................................................                    1.62-1.67
     Industrial......................................................                    2.56-2.61
     Financial.......................................................                    2.33-2.38
     Transportation..................................................                    2.50-2.65
Convertible corporate debt securities rated at least A3 issued by the
following type of issuers:
     Utility.........................................................                    1.72
     Industrial......................................................                    2.66
     Financial.......................................................                    2.43
     Transportation..................................................                    2.75
Convertible corporate debt securities rated at least Baa3 issued by the
following type of issuers:
     Utility.........................................................                    1.88
     Industrial......................................................                    2.82
     Financial.......................................................                    2.59
     Transportation..................................................                    2.85
Convertible corporate debt securities rated at least Ba3 issued by the
following type of issuers:
     Utility.........................................................                    1.95
     Industrial......................................................                    2.90
     Financial.......................................................                    2.65
     Transportation..................................................                    2.90
Convertible corporate debt securities rated at least B2 issued by the
following type of issuers:
     Utility.........................................................                    1.99
     Industrial......................................................                    2.93
     Financial.......................................................                    2.70
     Transportation..................................................                    2.95
</TABLE>

     "Moody's Eligible Assets" means:

         (a)      cash (including, for this purpose, receivables for
                  investments sold to a counterparty whose senior debt
                  securities are rated at least Baa3 by Moody's or a
                  counterparty approved by Moody's and payable within five
                  Business Days following such Valuation Date and dividends
                  and interest receivable within 49 days on investments);

         (b)      Short-Term Money Market Instruments;


         (c)      commercial paper that is not includible as a Short-Term
                  Money Market Instrument having on the Valuation Date a
                  rating from Moody's of at least P-1 and maturing within 270
                  days;

         (d)      preferred stocks (i) which either (A) are issued by issuers
                  whose senior debt securities are rated at least Baa1 by
                  Moody's or (B) are rated at least Baa3 by Moody's or (C) in
                  the event an issuer's senior debt securities or preferred
                  stock is not rated by Moody's, which either (1) are issued
                  by an issuer whose senior debt securities are rated at least
                  A- by S&P or (2) are rated at least A- by S&P and for this
                  purpose have been assigned a Moody's equivalent rating of at
                  least Baa3, (ii) of issuers which have (or, in the case of
                  issuers which are special purpose corporations, whose parent
                  companies have) common stock listed on the New York Stock
                  Exchange, the American Stock Exchange or the Nasdaq National
                  Market System, (iii) which have a minimum issue size (when
                  taken together with other of the issuer's issues of similar
                  tenor) of $50,000,000, (iv) which have paid cash dividends
                  consistently during the preceding three-year period (or, in
                  the case of new issues without a dividend history, are rated
                  at least A1 by Moody's or, if not rated by Moody's, are
                  rated at least AA- by S&P), (v) which pay cumulative cash
                  dividends in U.S. dollars, (vi) which are not convertible
                  into any other class of stock and do not have warrants
                  attached, (vii) which are not issued by issuers in the trans
                  portation industry and (viii) in the case of auction rate
                  preferred stocks, which are rated at least Aa3 by Moody's,
                  or if not rated by Moody's, AAA by S&P, AAA by Fitch or are
                  otherwise approved in writing by Moody's and have never had
                  a failed auction; provided, however, that for this purpose
                  the aggregate Market Value of the Trust's holdings of any
                  single issue of auction rate preferred stock shall not be
                  more than 1% of the Trust's total assets.

         (e)      common stocks (i) (A) which are traded on a nationally
                  recognized stock exchange or in the over-the-counter market,
                  (B) if cash dividend paying, pay cash dividends in U.S.
                  dollars and (C) which may be sold without restriction by the
                  Trust; provided, however, that (y) common stock which, while
                  a Moody's Eligible Asset owned by the Trust, ceases paying
                  any regular cash dividend will no longer be considered a
                  Moody's Eligible Asset until 71 days after the date of the
                  an nouncement of such cessation, unless the issuer of the
                  common stock has senior debt securities rated at least A3 by
                  Moody's and (z) the aggregate Market Value of the Trust's
                  holdings of the common stock of any issuer in excess of 4%
                  in the case of utility common stock and 6% in the case of
                  non-utility common stock of the aggregate Market Value of
                  the Trust's holdings shall not be Moody's Eligible Assets,
                  (ii) which are securities denominated in any currency other
                  than the U.S. dollar or securities of issuers formed under
                  the laws of jurisdictions other than the United States, its
                  states and the District of Columbia for which there are ADRs
                  or their equivalents which are traded in the United States
                  on exchanges or over-the-counter and are issued by banks
                  formed under the laws of the United States, its states or
                  the District of Columbia or (iii) which are securities of
                  issuers formed under the laws of jurisdictions other than
                  the United States (and in existence for at least five years)
                  for which no ADRs are traded; pro vided, however, that the
                  aggregate Market Value of the Trust's hold ings of
                  securities denominated in currencies other than the U.S.
                  dollar and ADRs in excess of (A) 6% of the aggregate Market
                  Value of the Outstanding shares of common stock of such
                  issuer thereof or (B) in excess of 10% of the Market Value
                  of the Trust's Moody's Eligible Assets with respect to
                  issuers formed under the laws of any single such non-U.S.
                  jurisdiction other than Australia, Belgium, Canada, Denmark,
                  Finland, France, Germany, Ireland, Italy, Japan, the
                  Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland
                  and the United Kingdom, shall not be a Moody's Eligible
                  Asset;

         (f)      ADR securities, based on the following guidelines: (i)
                  Sponsored ADR program or (ii) Level II or Level III ADRs.
                  Private placement Rule 144A ADRs are not eligible for
                  collateral consideration. Global GDR programs will be
                  evaluated on a case by case basis;

         (g)      U.S. Government Obligations;

         (h)      corporate evidences of indebtedness (i) which may be sold
                  without restriction by the Trust which are rated at least B3
                  (Caa subordinate) by Moody's (or, in the event the security
                  is not rated by Moody's, the security is rated at least BB-
                  by S&P and which for this purpose is as signed a Moody's
                  equivalent rating of one full rating category lower), with
                  such rating confirmed on each Valuation Date, (ii) which
                  have a minimum issue size of at least (A) $100,000,000 if
                  rated at least Baa3 or (B) $50,000,000 if rated B or Ba3,
                  (iii) which are not convertible or exchangeable into equity
                  of the issuing corporation and have a maturi ty of not more
                  than 30 years and (iv) for which, if rated below Baa3 or not
                  rated, the aggregate Market Value of the Trust's holdings do
                  not exceed 10% of the aggregate Market Value of any
                  individual issue of corporate evidences of indebtedness
                  calculated at the time of original issuance; and

         (i)      convertible corporate evidences of indebtedness (i) which
                  are issued by issuers whose senior debt securities are rated
                  at least B2 by Moody's (or, in the event an issuer's senior
                  debt securities are not rated by Moody's, which are issued
                  by issuers whose senior debt securities are rated at least
                  BB by S&P and which for this purpose is assigned a Moody's
                  equivalent rating of one full rating category lower), (ii)
                  which are convertible into common stocks which are traded on
                  the New York Stock Exchange or the American Stock Exchange
                  or are quoted on the Nasdaq National Market System and (iii)
                  which, if cash dividend paying, pay cash dividends in U.S.
                  dollars; provided, however, that once convertible corporate
                  evidences of indebtedness have been converted into common
                  stock, the common stock issued upon conversion must satisfy
                  the criteria set forth in clause (e) above and other
                  relevant criteria set forth in this definition in order to
                  be a Moody's Eligible Asset; provided, however, that the
                  Trust's investments in auction rate preferred stocks
                  described in clause (d) above shall be included in Moody's
                  Eligible Assets only to the extent that the aggregate Market
                  Value of such stocks does not exceed 10% of the aggregate
                  Market Value of all of the Trust's investments meeting the
                  criteria set forth in clauses (a) through (g) above less the
                  aggregate Market Value of those investments excluded from
                  Moody's Eligible Assets pursuant to the paragraph appearing
                  after clause (i) below; and

         (j)      no assets which are subject to any lien or irrevocably
                  deposited by the Trust for the payment of amounts needed to
                  meet the obligations de scribed in clauses (a)(i) through
                  (a)(iv) of the definition of "Basic Maintenance Amount" may
                  be includible in Moody's Eligible Assets.

     Notwithstanding anything to the contrary in the preceding clauses
(a)-(j), the Trust's investment in preferred stock, common stock, corporate
evidences of in debtedness and convertible corporate evidences of indebtedness
shall not be treated as Moody's Eligible Assets except to the extent they
satisfy the following diversifica tion requirements (utilizing Moody's
Industry and Sub-industry Categories) with respect to the Market Value of the
Trust's holdings:

Issuer:


                                          Non-Utility                Utility
                                         Maximum Single           Maximum Single
Moody's Rating(1)(2)                      Issuer(3)(4)             Issuer(3)(4)
--------------                            ------------             ------------
Aaa                                          100%                     100%
Aa                                            20%                      20%
A                                             10%                      10%
CS/CB, Baa(5)                                  6%                       4%
Ba                                             4%                       4%
B1/B2                                          3%                       3%
B3 or below                                    2%                       2%


Industry and State:

<TABLE>
<CAPTION>

                                                                  Utility
                                        Non-Utility                Maximum                  Utility
                                       Maximum Single            Single Sub-             Maximum Single
Moody's Rating(1)                       Industry(3)             Industry(3)(6)               State(3)
-----------------                       -----------             --------------               --------
<S>                                        <C>                       <C>                      <C>
Aaa                                        100%                      100%                     100%
Aa                                          60%                       60%                      20%
A                                           40%                       50%                      10%(7)
CS/CB, Baa(5)                               20%                       50%                       7%(7)
Ba                                          12%                       12%                       0%
B1/B2                                        8%                        8%                       0%
B3 or below                                  5%                        5%                       0%
</TABLE>

___________________

(1)  Unless conclusions regarding liquidity risk as well as estimates of both
     theprobability and severity of default for the Trust's assets can be
     derived from other sources, securities rated below B by Moody's and
     unrated securities, which are securities rated by neither Moody's, S&P
     nor Fitch, are limited to 10% of Moody's Eligible Assets. If a corporate,
     municipal or other debt security is unrated by Moody's, S&P or Fitch, the
     Trust will use the percentage set forth under "Below B and Unrated" in
     this table. Ratings assigned by S&P or Fitch are generally accepted by
     Moody's at face value. However, adjustments to face value may be made to
     particular categories of credits for which the S&P and/or Fitch rating
     does not seem to approximate a Moody's rating equivalent

(2)  Corporate evidences of indebtedness from issues ranging $50,000,000 to
     $100,000,000 are limited to 20% of Moody's Eligible Assets.

(3)  The referenced percentages represent maximum cumulative totals only for
     the related Moody's rating category and each lower Moody's rating
     category.

(4)  Issuers subject to common ownership of 25% or more are considered as one
     name.

(5)  CS/CB refers to common stock and convertible corporate evidences of
     indebtedness, which are diversified independently from the rating level.

(6)  In the case of utility common stock, utility preferred stock, utility
     evidences of indebtedness and utility convertible evidences of
     indebtedness, the definition of industry refers to sub-industries
     (electric, water, hydro power, gas, diversified). Investments in other
     sub-industries are eligible only to the extent that the combined sum
     represents a percentage position of the Moody's Eligible Assets less than
     or equal to the percentage limits in the diversification tables above.

(7)  Such percentage shall be 15% in the case of utilities regulated by
     California, New York and Texas.

     "Moody's Hedging Transactions" means purchases or sales of
exchange-traded financial futures contracts based on any index approved by
Moody's or Treasury Bonds, and purchases, writings or sales of exchange-traded
put options on such financial futures contracts, any index approved by Moody's
or Treasury Bonds, and purchases, writings or sales of exchange-traded call
options on such financial futures contracts, any index approved by Moody's or
Treasury Bonds, subject to the following limitations:

         (a)      the Trust will not engage in any Moody's Hedging Transaction
                  based on any index approved by Moody's (other than Closing
                  Transactions) that would cause the Trust at the time of such
                  transaction to own or have sold:

                   (i)     outstanding financial futures contracts based on
                           such index exceeding in number 10% of the average
                           number of daily traded financial futures contracts
                           based on such index in the 30 days preceding the
                           time of effecting such transaction as reported by
                           The Wall Street Journal; or

                  (ii)     outstanding financial futures contracts based on
                           any index approved by Moody's having a Market Value
                           exceeding 50% of the Market Value of all portfolio
                           securities of the Trust constituting Moody's
                           Eligible Assets owned by the Trust;


         (b)      The Trust will not engage in any Moody's Hedging Transaction
                  based on Treasury Bonds (other than Closing Transactions)
                  that would cause the Trust at the time of such transaction
                  to own or have sold:

                  (i)      outstanding financial futures contracts based on
                           Treasury Bonds with such contracts having an
                           aggregate Market Value exceeding 20% of the
                           aggregate Market Value of Moody's Eligible Assets
                           owned by the Trust and rated Aa by Moody's (or, if
                           not rated by Moody's but rated by S&P, rated AAA by
                           S&P); or

                  (ii)     outstanding financial futures contracts based on
                           Treasury Bonds with such contracts having an
                           aggregate Market Value exceeding 50% of the
                           aggregate Market Value of all portfolio securities
                           of the Trust constituting Moody's Eligible Assets
                           owned by the Trust (other than Moody's Eligible
                           Assets already subject to a Moody's Hedging
                           Transaction) and rated Baa or A by Moody's (or, if
                           not rated by Moody's but rated by S&P, rated A or
                           AA by S&P);

         (c)      The Trust will engage in Closing Transactions to close out
                  any outstanding financial futures contract based on any
                  index approved by Moody's if the amount of open interest in
                  such index as reported by The Wall Street Journal is less
                  than an amount to be mutually determined by Moody's and the
                  Trust;

         (d)      The Trust will engage in a Closing Transaction to close out
                  any outstanding financial futures contract by no later than
                  the fifth Business Day of the month in which such contract
                  expires and will engage in a Closing Transaction to close
                  out any outstanding option on a financial futures contract
                  by no later than the first Business Day of the month in
                  which such option expires;

         (e)      The Trust will engage in Moody's Hedging Transactions only
                  with respect to financial futures contracts or options
                  thereon having the next settlement date or the settlement
                  date immediately thereafter;

         (f)      The Trust (i) will not engage in options and futures
                  transactions for leveraging or speculative purposes, except
                  that an option or futures transaction shall not for these
                  purposes be considered a leveraged position or speculative
                  and (ii) will not write any call options or sell any
                  financial futures contracts for the purpose of hedging the
                  anticipated purchase of an asset prior to completion of such
                  purchase; and

         (g)      The Trust will not enter into an option or futures
                  transaction unless, after giving effect thereto, the Trust
                  would continue to have Moody's Eligible Assets with an
                  aggregate Discounted Value equal to or greater than the
                  Basic Maintenance Amount.

     "Moody's Industry Classifications" means, for the purposes of determining
Moody's Eligible Assets, each of the following industry classifications (or
such other classifications as Moody's may from time to time approve for
application to the Series B Preferred Shares).

         1.       Aerospace and Defense: Major Contractor, Subsystems,
                  Research, Aircraft Manufacturing, Arms, Ammunition.

         2.       Automobile: Automobile Equipment, Auto-Manufacturing, Auto
                  Parts Manufacturing, Personal Use Trailers, Motor Homes,
                  Dealers.

         3.       Banking: Bank Holding, Savings and Loans, Consumer Credit,
                  Small Loan, Agency, Factoring, Receivables.

         4.       Beverage, Food and Tobacco: Beer and Ale, Distillers, Wines
                  and Liquors, Distributors, Soft Drink Syrup, Bottlers,
                  Bakery, Mill Sugar, Canned Foods, Corn Refiners, Dairy
                  Products, Meat Products, Poultry Products, Snacks, Packaged
                  Foods, Distributors, Candy, Gum, Seafood, Frozen Food,
                  Cigarettes, Cigars, Leaf/Snuff, Vegetable Oil.

         5.       Buildings and Real Estate: Brick, Cement, Climate Controls,
                  Contracting, Engineering, Construction, Hardware, Forest
                  Products (building-related only), Plumbing, Roofing,
                  Wallboard, Real Estate, Real Estate Development, REITs, Land
                  Development.

         6.       Chemicals, Plastics and Rubber: Chemicals
                  (non-agricultural), Industrial Gases, Sulphur, Plastics,
                  Plastic Products, Abrasives, Coatings, Paints, Varnish,
                  Fabricating Containers.

         7.       Packaging and Glass: Glass, Fiberglass, Containers made of:
                  Glass, Metal, Paper, Plastic, Wood or Fiberglass.

         8.       Personal and Non-Durable Consumer Products (Manufacturing
                  Only): Soaps, Perfumes, Cosmetics, Toiletries, Cleaning
                  Supplies, School Supplies.

         9.       Diversified/Conglomerate Manufacturing.

         10.      Diversified/Conglomerate Service.

         11.      Diversified Natural Resources, Precious Metals and Minerals:
                  Fabricating, Distribution.

         12.      Ecological: Pollution Control, Waste Removal, Waste
                  Treatment and Waste Disposal.

         13.      Electronics: Computer Hardware, Electric Equipment,
                  Components, Controllers, Motors, Household Appliances,
                  Information Service Communication Systems, Radios, TVs, Tape
                  Machines, Speakers, Printers, Drivers, Technology.

         14.      Finance: Investment Brokerage, Leasing, Syndication,
                  Securities.

         15.      Farming and Agriculture: Livestock, Grains, Produce,
                  Agriculture Chemicals, Agricultural Equipment, Fertilizers.

         16.      Grocery: Grocery Stores, Convenience Food Stores.

         17.      Healthcare, Education and Childcare: Ethical Drugs,
                  Proprietary Drugs, Research, Health Care Centers, Nursing
                  Homes, HMOs, Hospitals, Hospital Supplies, Medical
                  Equipment.

         18.      Home and Office Furnishings, Housewares, and Durable
                  Consumer Products: Carpets, Floor Coverings, Furniture,
                  Cooking, Ranges.

         19.      Hotels, Motels, Inns and Gaming.

         20.      Insurance: Life, Property and Casualty, Broker, Agent,
                  Surety.

         21.      Leisure, Amusement, Motion Pictures, Entertainment: Boating,
                  Bowling, Billiards, Musical Instruments, Fishing, Photo
                  Equipment, Records, Tapes, Sports, Outdoor Equipment
                  (Camping), Tourism, Resorts, Games, Toy Manufacturing,
                  Motion Picture Production Theaters, Motion Picture
                  Distribution.

         22.      Machinery (Non-Agricultural, Non-Construction,
                  Non-Electronic): Industrial, Machine Tools, Steam
                  Generators.

         23.      Mining, Steel, Iron and Non-Precious Metals: Coal, Copper,
                  Lead, Uranium, Zinc, Aluminum, Stainless Steel, Integrated
                  Steel, Ore Production, Refractories, Steel Mill Machinery,
                  Mini-Mills, Fabricating, Distribution and Sales of the
                  foregoing.

         24.      Oil and Gas: Crude Producer, Retailer, Well Supply, Service
                  and Drilling.

         25.      Printing, Publishing, and Broadcasting: Graphic Arts, Paper,
                  Paper Products, Business Forms, Magazines, Books,
                  Periodicals, Newspapers, Textbooks, Radio, T.V., Cable
                  Broadcasting Equipment.

         26.      Cargo Transport: Rail, Shipping, Railroads, Rail-car
                  Builders, Ship Builders, Containers, Container Builders,
                  Parts, Overnight Mail, Trucking, Truck Manufacturing,
                  Trailer Manufacturing, Air Cargo, Transport.

         27.      Retail Stores: Apparel, Toy, Variety, Drugs, Department,
                  Mail Order Catalog, Showroom.

         28.      Telecommunications: Local, Long Distance, Independent,
                  Telephone, Telegraph, Satellite, Equipment, Research,
                  Cellular.

         29.      Textiles and Leather: Producer, Synthetic Fiber, Apparel
                  Manufacturer, Leather Shoes.

         30.      Personal Transportation: Air, Bus, Rail, Car Rental.

         31.      Utilities: Electric, Water, Hydro Power, Gas.

         32.      Diversified Sovereigns: Semi-sovereigns, Canadian Provinces,
                  Supra- national Agencies.

         The Trust will use SIC codes in determining which industry
classification is applicable to a particular investment in consultation with
the Independent Accountant and Moody's, to the extent the Trust considers
necessary.

     "1933 Act" means the Securities Act of 1933, as amended, or any successor
statute.

     "1940 Act" means the Investment Company Act of 1940, as amended, or any
successor statute.

     "Non-Call Period" means a period determined by the Board of Trustees
after consultation with the Broker-Dealers, during which the Series B
Preferred Shares subject to such Special Dividend Period is not subject to
redemption at the option of the Trust but only to mandatory redemption.

     "Notice of Redemption" means any notice with respect to the redemption of
Series B Preferred Shares pursuant to paragraph 3 of Part I of this Statement
of Preferences.

     "Other Rating Agency" means any rating agency other than Moody's or S&P
then providing a rating for the Series B Preferred Shares at the request of
the Trust.

     "Other Rating Agency Eligible Assets" means assets of the Trust
designated by any Other Rating Agency as eligible for inclusion in calculating
the discounted value of the Trust's assets in connection with such Other
Rating Agency's rating of the Series B Preferred Shares.

     "Outstanding" means, as of any date, Preferred Shares theretofore issued
by the Trust except:

         (a)      any such Preferred Share theretofore cancelled by the Trust
                  or deliv ered to the Trust for cancellation;

         (b)      any such Preferred Share other than an auction market
                  Preferred Share as to which a notice of redemption shall
                  have been given and for whose payment at the redemption
                  thereof Deposit Assets in the necessary amount are held by
                  the Trust in trust for, or have been irrevocably deposited
                  with the relevant disbursing agent for payment to, the
                  holder of such share pursuant to the Statement of
                  Preferences with respect thereto;

         (c)      in the case of an auction market Preferred Share, including
                  the Series B Preferred Shares, any such shares theretofore
                  delivered to the applicable auction agent for cancellation
                  or with respect to which the Trust has given notice of
                  redemption and irrevocably deposited with the applicable
                  paying agent sufficient funds to redeem such shares; and

         (d)      any such Preferred Share in exchange for or in lieu of which
                  other shares have been issued and delivered.

         Notwithstanding the foregoing, (i) for purposes of voting rights
(including the determination of the number of shares required to constitute a
quorum), any Preferred Shares as to which the Trust or any subsidiary of the
Trust is the holder or Existing Holder, as applicable, will be disregarded and
deemed not Outstanding and (ii) in connection with any auction, any auction
market Preferred Shares as to which the Trust or any Person known to the
auction agent to be a subsidiary of the Trust is the holder or Existing
Holder, as applicable, will be disregarded and not deemed Outstanding.

     "Paying Agent" means The Bank of New York unless and until another entity
appointed by a resolution of the Board of Trustees enters into an agreement
with the Trust to serve as paying agent, which paying agent may be the same as
the Auction Agent and, with respect to any other class or series of Preferred
Shares, the Person appointed by the Trust as dividend-disbursing or paying
agent with respect to such class or series.

     "Person" means and includes an individual, a partnership, the Trust, a
trust, a corporation, a limited liability company, an unincorporated
association, a joint venture or other entity or a government or any agency or
political subdivision thereof.

     "Preferred Shares" means the preferred shares, par value $.001 per share,
of the Trust, and includes the Series B Preferred Shares.

     "Premium Call Period" means a period consisting of a number of whole
years as determined by the Board of Trustees after consultation with the
Broker-Dealers, during each year of which the shares subject to such Special
Dividend Period will be redeemable at the Trust's option at a price per share
equal to the Liquidation Preference plus accumulated but unpaid dividends
(whether or not earned or declared) plus a premium expressed as a percentage
or percentages of the Liquidation Preference or expressed as a formula using
specified variables as determined by the Board of Trustees after consultation
with the Broker-Dealers.

     "Pricing Service" means any of the following: Bloomberg Financial
Service, Bridge Information Services, Data Resources Inc., FT Interactive,
International Securities Market Association, Merrill Lynch Securities Pricing
Service, Muller Data Corp., Reuters, S&P/J.J. Kenny, Telerate, Trepp Pricing
and Wood Gundy.

     "Quarterly Valuation Date" means the last Business Day of each March,
June, September and December of each year.

     "Rating Agency" means Moody's and S&P as long as such rating agency is
then rating the Series B Preferred Shares at the Trust's request or any other
rating agency then rating the Series B Preferred Shares at the Trust's
request.

     "Redemption Date" has the meaning set forth in paragraph 3(e) of Part I
of this Statement of Preferences.

     "Redemption Default" has the meaning set forth in paragraph 3(e) of Part
I of this Statement of Preferences.

     "Redemption Price" shall mean, (a) with respect to a Dividend Period that
is not a Premium Call Period, the Liquidation Preference plus an amount equal
to accumulated but unpaid dividends thereon (whether or not earned or
declared) to the Redemption Date, or, (b) with respect to a Dividend Period
that is a Premium Call Period, the Liquidation Preference plus an amount equal
to accumulated but unpaid dividends thereon (whether or not earned or
declared) to the Redemption Date plus a redemption premium, if any, determined
by the Board of Trustees after consultation with the Broker-Dealers and set
forth in the notice describing any applicable Specific Redemption Provisions.
For the purposes of this Statement of Preferences, "Redemption Price" shall
have a correlative meaning with respect to any other class or series of
Preferred Shares.

     "Reference Banks" means four major banks in the London interbank market
selected by Merrill Lynch, Pierce, Fenner & Smith Incorporated or its
affiliates or successors or such other party as the Trust may from time to
time appoint.

     "Reference Rate" means, with respect to the determination of the Default
Rate, the applicable LIBOR Rate for a Dividend Period of 364 days or fewer or
the applicable Treasury Index Rate for a Dividend Period of longer than 364
days and, with respect to the determination of the Maximum Rate, the LIBOR
Rate or the Treasury Index Rate, as appropriate.

     "Registrar" means The Bank of New York, unless and until another entity
appointed by a resolution of the Board of Trustees enters into an agreement
with the Trust to serve as registrar.

     "S&P" means Standard & Poor's Ratings Services, or its successors at law.

     "S&P Discount Factor" means, with respect to a S&P Eligible Asset
specified below, the following applicable number:


  Asset Class Obligor
     (Collateral)                     Discount Factors (1)
     ------------                     --------------------
Common Stock                                 230.4%

30-yr treasury notes                         126.7%

10-yr treasury notes                         121.6%

5-yr treasury notes                          115.1%

2-yr treasury notes                          109.4%

52 week treasury bills                       105.8%

STMMI with maturities                        112.7%
from 181 to 360 days

STMMI with maturities                         104%
from 1 to 180

Non-rated 2a-7 eligible                       111%
money market funds used
as sweep accounts

Cash, receivables due                         100%
within 5 business days
of a Valuation Date,
demand deposits and
STMMI with next day
maturities held in
'A-1+' rated institutions,
'AAAm' rated money
market funds & 'A-1+'
commercial paper with
maturities of 30 days
or less
______________
         (1)      For an S&P rating of AAA.

     "S&P Eligible Assets" means:

         (a)      Deposit Assets;

         (b)      common stocks that satisfy all of the following conditions:

                  (i)      such common stock (including the common stock of
                           any predecessor or constituent issuer) has been
                           traded on a recognized national securities exchange
                           or quoted on the National Market System (or any
                           equivalent or successor thereto) of Nasdaq for at
                           least 450 days,

                  (ii)     the Market Capitalization of such issuer of common
                           stock exceeds $100 million,

                  (iii)    the issuer of such common stock is not an entity
                           that is treated as a partnership for federal income
                           tax purposes,

                  (iv)     if such issuer is organized under the laws of any
                           jurisdiction other than the United States, any
                           state thereof, any possession or territory thereof
                           or the District of Columbia, the common stock of
                           such issuer held by the Corporation is traded on a
                           recognized national securities exchange or quoted
                           on the National Market System of Nasdaq either
                           directly or in the form of depository receipts, and



                  (v)      if such issuer is registered as an investment
                           company under the 1940 Act, such issuer does not
                           invest more than 25% of the value of its gross
                           assets in securities that are not S&P Eligible
                           Assets by reason of clause (iv) above;

         provided, however, that the Trust's holdings of the common stock of
         any single issuer that satisfies the conditions set forth in clauses
         (i) through (v) above shall be included in S&P Eligible Assets only
         to the extent that

                  (1)      restricted stocks (144a securities) or any pink
                           sheet stocks (generally, stock that are not carried
                           in daily over-the-counter newspaper listings) are
                           ineligible; and

                  (2)      the aggregate Market Value of the Trust's holdings
                           of any single issuer is not in excess of 4% of the
                           aggregate Market Value of the Trust's S&P Eligible
                           Assets.

         (c)      preferred stocks, on such basis as S&P may determine in
                  response to a request from the Trust.

Notwithstanding the foregoing, an asset will not be considered an S&P Eligible
Asset if it is held in a margin account, is subject to any material lien,
mortgage, pledge, security interest or security agreement of any kind or has
been deposited irrevocably for the payment of dividends, redemption payments
or any other payment or obligation under the Trust's Statement of Preferences.

     "S&P Hedging Transactions" has the meaning set forth in paragraph
11(b)(i) of Part I of this Statement of Preferences.


     "Securities Depository" means The Depository Trust Company and its
successors and assigns or any successor securities depository selected by the
Trust that agrees to follow the procedures required to be followed by such
securities depository in connection with the Series B Preferred Shares.

     "Series B Asset Coverage Cure Date" means, with respect to the failure by
the Trust to maintain Asset Coverage (as required by paragraph 9(a)(i)(A) of
Part I of this Statement of Preferences) as of an applicable Quarterly
Valuation Date, 10 Business Days following such Quarterly Valuation Date, and
shall, for the purposes of this Statement of Preferences, have a correlative
meaning with respect to any other class or series of Preferred Shares.

     "Series B Preferred Shares" means the Trust's Series B Auction Market
Preferred Shares, par value $.001 per share, liquidation preference $25,000
per share.

     "Short-Term Money Market Instruments" means the following types of
instruments if, on the date of purchase or other acquisition thereof by the
Trust, the remaining term to maturity thereof is not in excess of 180 days:

                          (i)       commercial paper rated A-1 if such
                                    commercial paper matures in 30 days, or
                                    A-1+ if such commercial paper matures in
                                    over 30 days;

                          (ii)      AAAm rated money market funds;

                          (iii)     demand or time deposits in, and banker's
                                    acceptances and certificates of deposit of
                                    (A) a depository institution or trust
                                    company incorporated under the laws of the
                                    United States of America or any state
                                    thereof or the District of Columbia (B) a
                                    United States branch office or agency of a
                                    foreign depository institution (provided
                                    that such branch office or agency is
                                    subject to banking regulation under the
                                    laws of the United States, any state
                                    thereof or the District of Columbia), or
                                    (C) A-1+ rated institutions;

                          (iv)      overnight funds; and

                          (v)       U.S. Government Obligations.

         "Special Dividend Period" means a Dividend Period that is not a
Standard Dividend Period.

         "Specific Redemption Provisions" means, with respect to any Special
Dividend Period of more than one year, either, or any combination of (i) a
Non-Call Period and (ii) a Premium Call Period.

         "Standard Dividend Period" means a Dividend Period of seven days,
subject to increase or decrease to the extent necessary for the next Auction
Date and Dividend Payment Date to each be Business Days.

         "Submission Deadline" means 1:30 p.m., New York City time, on any
Auction Date or such other time on any Auction Date by which Broker-Dealers
are required to submit Orders to the Auction Agent as specified by the Auction
Agent from time to time.

         "Transfer Agent" means The Bank of New York, unless and until another
entity appointed by a resolution of the Board of Trustees enters into an
agreement with the Trust to serve as transfer agent.

         "Treasury Index Rate" means the average yield to maturity for
actively traded marketable U.S. Treasury fixed interest rate securities having
the same number of 30-day periods to maturity as the length of the applicable
Dividend Period, determined, to the extent necessary, by linear interpolation
based upon the yield for such securities having the next shorter and next
longer number of 30-day periods to maturity treating all Dividend Periods with
a length greater than the longest maturity for such securities as having a
length equal to such longest maturity, in all cases based upon data set forth
in the most recent weekly statistical release published by the Board of
Governors of the Federal Reserve System (currently in H.15 (519)); provided,
however, if the most recent such statistical release shall not have been
published during the 15 days preceding the date of computation, the foregoing
computations shall be based upon the average of comparable data as quoted to
the Trust by at least three recognized dealers in U.S. Government Obligations
selected by the Trust.

         "Trust" means The Gabelli Utility Trust, a Delaware statutory trust.

         "U.S. Government Obligations" means direct obligations of the United
States or by its agencies or instrumentalities that are entitled to the full
faith and credit of the United States and that, other than United States
Treasury Bills, provide for the periodic payment of interest and the full
payment of principal at maturity or call for redemption.

         "Valuation Date" means the last Business Day of each week, or such
other date as the Trust and Rating Agencies may agree to for purposes of
determining the Basic Maintenance Amount.

         "Voting Period" has the meaning set forth in paragraph 6(b) of Part I
of this Statement of Preferences.

                  14. Interpretation. References to sections, subsections,
clauses, sub-clauses, paragraphs and subparagraphs that do not reference a
specific Part of this Statement of Preferences or another document shall refer
to the Part of this Statement of Preferences in which the reference occurs,
unless the context otherwise requires.

                          Part II: Auction Procedures

                  1. Certain Definitions. Unless the context or use indicates
another or different meaning or intent, each of the following terms when used
in this Statement of Preferences shall have the meaning ascribed to it below,
whether such term is used in the singular or plural and regardless of tense:

         "Agent Member" means a member of or participant in the Securities
Depository that will act on behalf of a Bidder.

         "Available Preferred Shares" has the meaning set forth in paragraph
4(a)(i) of Part II of this Statement of Preferences.

         "Existing Holder" means (a) a Person who beneficially owns those
Preferred Shares, including Series B Preferred Shares, listed in that Person's
name in the records of the Trust or Auction Agent, as the case may be, or (b)
the beneficial owner of those Series B Preferred Shares which are listed under
such person's Broker-Dealer's name in the records of the Auction Agent, which
Broker-Dealer shall have signed a Master Purchaser's Letter.

         "Hold Order" has the meaning set forth in paragraph 2(a) of Part II
of this Statement of Preferences.

         "Master Purchaser's Letter" means the letter which is required to be
executed by each prospective purchaser of Series B Preferred Shares or by the
Broker-Dealer through whom the shares will be held.

         "Order" has the meaning set forth in paragraph 2(a) of Part II of
this Statement of Preferences.

         "Potential Holder" means (a) any Existing Holder who may be
interested in acquiring additional Series B Preferred Shares or (b) any other
Person who may be interested in acquiring Series B Preferred Shares and who
has signed a Master Purchaser's Letter or whose shares will be listed under
such person's Broker-Dealer's name on the records of the Auction Agent which
Broker-Dealer shall have executed a Master Purchaser's Letter.

         "Sell Order" has the meaning set forth in paragraph 2(a) of Part II
of this Statement of Preferences.

         "Submitted Bid" has the meaning set forth in paragraph 4(a) of Part
II of this Statement of Preferences.

         "Submitted Hold Order" has the meaning set forth in paragraph 4(a) of
Part II of this Statement of Preferences.

         "Submitted Order" has the meaning set forth in paragraph 4(a) of Part
II of this Statement of Preferences.

         "Submitted Sell Order" has the meaning set forth in paragraph 4(a) of
Part II of this Statement of Preferences.

         "Sufficient Clearing Bids" has the meaning set forth in paragraph
4(a)(ii) of Part II of this Statement of Preferences.

         "Sufficient Clearing Orders" means that all Series B Preferred Shares
are the subject of Submitted Hold Orders or that the number of Series B
Preferred Shares that are the subject of Submitted Bids by Potential Holders
specifying one or more rates equal to or less than the Maximum Rate exceeds or
equals the sum of (a) the number of Series B Preferred Shares that are subject
of Submitted Bids by Existing Holders specifying one or more rates higher than
the Maximum Rate and (b) the number of Series B Preferred Shares that are
subject to Submitted Sell Orders.

         "Winning Bid Rate" means the lowest rate specified in the Submitted
Bids which if:

         (a)      (i) each such Submitted Bid of Existing Holders specifying
                  such lowest rate and



                  (ii)     all other such Submitted Bids of Existing Holders
                           specifying lower rates were rejected, thus
                           entitling such Existing Holders to continue to hold
                           the shares of such series that are subject to such
                           Submitted Bids; and

         (b)      (i)      each such Submitted Bid of Potential Holders
                           specifying such lowest rate and

                  (ii)     all other such Submitted Bids of Potential Holders
                           specifying lower rates were accepted;

would result in such Existing Holders described in subclause (a) above
continuing to hold an aggregate number of Outstanding Series B Preferred
Shares which, when added to the number of Outstanding Series B Preferred
Shares to be purchased by such Potential Holders described in subclause (b)
above, would equal not less than the Available Preferred Shares.


                  2. Orders.

                           (a) On or prior to the Submission Deadline on each
Auction Date for Series B Preferred Shares:

                          (i) each Beneficial Owner of Series B Preferred
         Shares may submit to its Broker-Dealer by telephone or otherwise
         information as to:

                                    (A) the number of Outstanding Series B
                  Preferred Shares, if any, held by such Beneficial Owner
                  which such Beneficial Owner desires to continue to hold
                  without regard to the Applicable Rate for the next
                  succeeding Dividend Period;

                                    (B) the number of Outstanding Series B
                  Preferred Shares, if any, held by such Beneficial Owner
                  which such Beneficial Owner offers to sell if the Applicable
                  Rate for the next succeeding Dividend Period shall be less
                  than the rate per annum specified by such Beneficial Owner;
                  and/or

                                    (C) the number of Outstanding Series B
                  Preferred Shares, if any, held by such Beneficial Owner
                  which such Beneficial Owner offers to sell without regard to
                  the Applicable Rate for the next succeeding Dividend Period;
                  and

                          (ii) each Broker-Dealer, using lists of potential
         Beneficial Owners, shall in good faith for the purpose of conducting
         a competitive Auction in a commercially reasonable manner, contact
         potential Beneficial Owners (by telephone or otherwise), including
         Persons that are not Beneficial Owners, on such lists to determine
         the number of Series B Preferred Shares, if any, that each such
         potential Beneficial Owner offers to purchase if the Applicable Rate
         for the next succeeding Dividend Period shall not be less than the
         rate per annum specified by such potential Beneficial Owner.

For the purposes hereof, the communication by a Beneficial Owner or potential
Beneficial Owner to a Broker-Dealer, or by a Broker-Dealer to the Auction
Agent, of information referred to in clauses (a)(i) or (a)(ii) of this
paragraph (2) is hereinafter referred to as an "Order" and collectively as
"Orders" and each Beneficial Owner and each potential Beneficial Owner placing
an Order with a Broker-Dealer, and such Broker-Dealer placing an Order with
the Auction Agent, is hereinafter referred to as a "Bidder" and collectively
as "Bidders;" an Order containing the information referred to in clause
(a)(i)(A) of this paragraph (2) is hereinafter referred to as a d Order" and
collectively as "Hold Orders;" an Order containing the information referred to
in clauses (a)(i)(B) or (a)(ii) of this paragraph (2) is hereinafter referred
to as a "Bid" and collectively as "Bids;" and an Order containing the
information referred to in clause (a)(i)(C) of this paragraph (2) is
hereinafter referred to as a "Sell Order" and collectively as "Sell Orders."

                           (b) (i) A Bid by a Beneficial Owner or an Existing
Holder of Series B Preferred Shares subject to an Auction on any Auction Date
shall constitute an irrevocable offer to sell:

                                    (A) the number of Outstanding Series B
                  Preferred Shares specified in such Bid if the Applicable
                  Rate determined on such Auction Date shall be less than the
                  rate specified therein;

                                    (B) such number or a lesser number of
                  Outstanding Series B Preferred Shares to be determined as
                  set forth in paragraph 5(a)(iv) if the Applicable Rate for
                  Series B Preferred Shares determined on such Auction Date
                  shall be equal to the rate specified therein; or


                                    (C) the number of Outstanding Series B
                  Preferred Shares specified in such Bid if the rate specified
                  therein shall be higher than the Maximum Rate, or such
                  number or a lesser number of Outstanding Series B Preferred
                  Shares to be determined as set forth in paragraph 5(b)(iii)
                  if the rate specified therein shall be higher than the
                  Maximum Rate and Sufficient Clearing Bids do not exist.

                          (ii) A Sell Order by a Beneficial Owner or an
         Existing Holder of Series B Preferred Shares subject to an Auction on
         any Auction Date shall constitute an irrevocable offer to sell:

                                    (A) the number of Outstanding Series B
                  Preferred Shares specified in such Sell Order; or

                                    (B) such number or a lesser number of
                  Outstanding Series B Preferred Shares as set forth in
                  paragraph 5(b)(iii) if Sufficient Clearing Bids do not
                  exist; provided, however, that a Broker-Dealer that is an
                  Existing Holder with respect to Series B Preferred Shares
                  shall not be liable to any Person for failing to sell such
                  shares pursuant to a Sell Order described in the proviso to
                  paragraph 3(c) if (1) such shares were transferred by the
                  Beneficial Owner thereof without compliance by such
                  Beneficial Owner or its transferee Broker-Dealer (or other
                  transferee Person, if permitted by the Trust) with the
                  provisions of paragraph 6 or (2) such Broker- Dealer has
                  informed the Auction Agent pursuant to the terms of its
                  Broker-Dealer Agreement that, according to such
                  Broker-Dealer's records, such Broker-Dealer believes it is
                  not the Existing Holder of such shares.

                          (iii) A Bid by a Potential Holder of Series B
         Preferred Shares subject to an Auction on any Auction Date shall
         constitute an irrevocable offer to purchase:

                                    (A) the number of Outstanding Series B
                  Preferred Shares specified in such Bid if the Applicable
                  Rate determined on such Auction Date shall be higher than
                  the rate specified therein; or

                                    (B) such number or a lesser number of
                  Outstanding Series B Preferred Shares as set forth in
                  paragraph 5(a)(v) if the Applicable Rate determined on such
                  Auction Date shall be equal to the rate specified therein.

                           (c) No Order for any number of Series B Preferred
Shares other than whole shares shall be valid.

                  3. Submission of Orders by Broker-Dealers to Auction Agent.

                           (a) Each Broker-Dealer shall submit in writing to
the Auction Agent prior to the Submission Deadline on each Auction Date all
Orders for Series B Preferred Shares subject to an Auction on such Auction
Date obtained by such Broker-Dealer, designating itself (unless otherwise
permitted by the Trust) as an Existing Holder in respect of shares subject to
Orders submitted or deemed submitted to it by Beneficial Owners and as a
Potential Holder in respect of shares subject to Orders submitted to it by
potential Beneficial Owners, and shall specify with respect to each Order for
such shares:

                          (i) the name of the Bidder placing such Order (which
         shall be the Broker-Dealer unless otherwise permitted by the Trust);

                          (ii) the aggregate number of Series B Preferred
         Shares that are the subject of such Order;

                          (iii) to the extent that such Bidder is an Existing
         Holder of Series B Preferred Shares:

                                    (A) the number of Series B Preferred
                  Shares, if any, subject to any Hold Order of such Existing
                  Holder;

                                    (B) the number of Series B Preferred
                  Shares, if any, subject to any Bid of such Existing Holder
                  and the rate specified in such Bid; and

                                    (C) the number of Series B Preferred
                  Shares, if any, subject to any Sell Order of such Existing
                  Holder; and



                          (iv) to the extent such Bidder is a Potential Holder
         of Series B Preferred Shares, the rate and number of Series B
         Preferred Shares specified in such Potential Holder's Bid.

                           (b) If any rate specified in any Bid contains more
than three figures to the right of the decimal point, the Auction Agent shall
round such rate up to the next highest one thousandth (.001) of 1%.

                           (c) If an Order or Orders covering all of the
Outstanding Series B Preferred Shares held by any Existing Holder is not
submitted to the Auction Agent prior to the Submission Deadline, the Auction
Agent shall deem a Hold Order to have been submitted by or on behalf of such
Existing Holder covering the number of Outstanding Series B Preferred Shares
held by such Existing Holder and not subject to Orders submitted to the
Auction Agent; provided, however, that if an Order or Orders covering all of
the Outstanding Series B Preferred Shares held by any Existing Holder is not
submitted to the Auction Agent prior to the Submission Deadline for an Auction
relating to a Special Dividend Period consisting of more than 28 calendar
days, the Auction Agent shall deem a Sell Order to have been submitted by or
on behalf of such Existing Holder covering the number of Outstanding Series B
Preferred Shares held by such Existing Holder and not subject to Orders
submitted to the Auction Agent.

                           (d) If one or more Orders of an Existing Holder is
submitted to the Auction Agent covering in the aggregate more than the number
of Outstanding Series B Preferred Shares subject to an Auction held by such
Existing Holder, such Orders shall be considered valid in the following order
of priority:

                          (i) all Hold Orders shall be considered valid, but
         only up to and including in the aggregate the number of Outstanding
         Series B Preferred Shares held by such Existing Holder, and if the
         number of shares subject to such Hold Orders exceeds the number of
         Outstanding Series B Preferred Shares held by such Existing Holder,
         the number of shares subject to each such Hold Order shall be reduced
         pro rata to cover the number of Outstanding Series B Preferred Shares
         held by such Existing Holder;

                          (ii)(A) any Bid for Series B Preferred Shares shall
         be considered valid up to and including the excess of the number of
         Outstanding Series B Preferred Shares held by such Existing Holder
         over the number of Series B Preferred Shares subject to any Hold
         Orders referred to in clause (d)(i) above;


                                    (B) subject to subclause (d)(ii)(A), if
                  more than one Bid of an Existing Holder for Series B
                  Preferred Shares is submitted to the Auction Agent with the
                  same rate and the number of Outstanding Series B Preferred
                  Shares subject to such Bids is greater than such excess,
                  such Bids shall be considered valid up to and including the
                  amount of such excess, and the number of Series B Preferred
                  Stock subject to each Bid with the same rate shall be
                  reduced pro rata to cover the number of shares equal to such
                  excess;

                                    (C) subject to subclauses (d)(ii)(A) and
                  (B), if more than one Bid of an Existing Holder for Series B
                  Preferred Shares is submitted to the Auction Agent with
                  different rates, such Bids shall be considered valid in the
                  ascending order of their respective rates up to and
                  including the amount of such excess; and

                                    (D) in any such event, the number, if any,
                  of such Outstanding Series B Preferred Shares subject to any
                  portion of Bids considered not valid in whole or in part
                  under this paragraph 3(d)(ii) shall be treated as the
                  subject of a Bid by or on behalf of a Potential Holder at
                  the rate specified therein; and

                          (iii) all Sell Orders for Series B Preferred Shares
         shall be considered valid up to and including the excess of the
         number of Outstanding Series B Preferred Shares held by such Existing
         Holder over the sum of Outstanding Series B Preferred Shares subject
         to valid Hold Orders referred to in paragraph 3(d)(i) above and valid
         Bids referred to in paragraph 3(d)(ii) above.

                           (e) If more than one Bid for Series B Preferred
Shares is submitted to the Auction Agent by or on behalf of any Potential
Holder, each such Bid submitted shall be a separate Bid with the rate and
number of shares therein specified.

                           (f) Any Order submitted by a Beneficial Owner or a
potential Beneficial Owner to its Broker-Dealer, or by a Broker-Dealer to the
Auction Agent, prior to the Submission Deadline on any Auction Date, shall be
irrevocable.

                  4. Determination of Sufficient Clearing Bids, Winning Bid
Rate and Applicable Rate.

                           (a) Not earlier than the Submission Deadline on
each Auction Date for Series B Preferred Shares, the Auction Agent shall
assemble all valid Orders submitted or deemed submitted to it by the
Broker-Dealers (each such Order as submitted or deemed submitted by a
Broker-Dealer being hereinafter referred to individually as a "Submitted Hold
Order," a "Submitted Bid" or a "Submitted Sell Order," as the case may be, or
as a "Submitted Order" and collectively as "Submitted Hold Orders," "Submitted
Bids" or "Submitted Sell Orders," as the case may be, or as "Submitted
Orders") and shall determine:

                          (i) the excess of the number of Outstanding Series B
         Preferred Shares over the number of Outstanding Series B Preferred
         Shares subject to Submitted Hold Orders (such excess being
         hereinafter referred to as the "Available Preferred Shares");

                          (ii) from the Submitted Orders for Series B
         Preferred Shares whether:

                                    (A) the number of Outstanding Series B
                  Preferred Shares subject to Submitted Bids of Potential
                  Holders specifying one or more rates equal to or lower than
                  the Maximum Rate exceeds or is equal to the sum of

                                    (B) the number of Outstanding Series B
                  Preferred Shares subject to Submitted Bids of Existing
                  Holders specifying one or more rates higher than the Maximum
                  Rate; and

                                    (C) the number of Outstanding Series B
                  Preferred Shares subject to Submitted Sell Orders (in the
                  event such excess or such equality exists (other than
                  because the number of Series B Preferred Shares in clauses
                  (a)(ii)(A) and (B) above is zero because all of the
                  Outstanding Series B Preferred Shares are subject to
                  Submitted Hold Orders), such Submitted Bids in clause
                  (a)(ii)(A) above being hereinafter referred to collectively
                  as "Sufficient Clearing Bids"); and



                           (iii) if Sufficient Clearing Bids exist, the
         Winning Bid Rate.

                           (b) Not later than 9:30 A.M., New York City time,
on each Auction Date, the Auction Agent shall advise the Trust of the Maximum
Rate for the Series B Preferred Shares for which an Auction is being held on
the Auction Date and, based on such determination, promptly after the Auction
Agent has made the determinations pursuant to paragraph 4(a), the Auction
Agent shall advise the Trust of the Applicable Rate for the next succeeding
Dividend Period thereof as follows:

                          (i) if Sufficient Clearing Bids exist, that the
         Applicable Rate for the next succeeding Dividend Period thereof shall
         be equal to the Winning Bid Rate so determined;

                          (ii) if Sufficient Clearing Bids do not exist (other
         than because all of the Outstanding shares of such series are subject
         to Submitted Hold Orders), that the Applicable Rate for the next
         succeeding Dividend Period thereof shall be equal to the Maximum
         Rate; or

                          (iii) if all of the Outstanding Series B Preferred
         Shares are subject to Submitted Hold Orders, that the Applicable Rate
         for the next succeeding Dividend Period thereof shall be the All Hold
         Rate.

                  5. Acceptance and Rejection of Submitted Bids and Submitted
Sell Orders and Allocation.

         Existing Holders shall continue to hold the Series B Preferred Shares
that are subject to Submitted Hold Orders, and, based on the determinations
made pursuant to paragraph 4(a), the Submitted Bids and Submitted Sell Orders
shall be accepted or rejected by the Auction Agent and the Auction Agent shall
take such other action as set forth below:

                           (a) If Sufficient Clearing Bids for Series B
Preferred Shares have been made, all Submitted Sell Orders shall be accepted
and, subject to the provisions of paragraphs 5(d) and 5(e), Submitted Bids
shall be accepted or rejected as follows in the following order of priority
and all other Submitted Bids shall be rejected:

                          (i) Existing Holders' Submitted Bids for Series B
         Preferred Shares specifying any rate that is higher than the Winning
         Bid Rate shall be accepted, thus requiring each such Existing Holder
         to sell the Series B Preferred Shares subject to such Submitted Bids;

                          (ii) Existing Holders' Submitted Bids for shares
         Series B Preferred Shares specifying any rate that is lower than the
         Winning Bid Rate shall be rejected, thus entitling each such Existing
         Holder to continue to hold the Series B Preferred Shares subject to
         such Submitted Bids;

                          (iii) Potential Holders' Submitted Bids for Series B
         Preferred Shares specifying any rate that is lower than the Winning
         Bid Rate shall be accepted;

                          (iv) each Existing Holder's Submitted Bid for Series
         B Preferred Shares specifying a rate that is equal to the Winning Bid
         Rate shall be rejected, thus entitling such Existing Holder to
         continue to hold the Series B Preferred Shares subject to such
         Submitted Bid, unless the number of Outstanding Series B Preferred
         Shares subject to all such Submitted Bids shall be greater than the
         number of Series B Preferred Shares ("remaining shares") in the
         excess of the Available Preferred Shares over the number of Series B
         Preferred Shares subject to Submitted Bids described in paragraphs
         5(a)(ii) and 5(a)(iii), in which event such Submitted Bid of such
         Existing Holder shall be rejected in part, and such Existing Holder
         shall be entitled to continue to hold Series B Preferred Shares
         subject to such Submitted Bid, but only in an amount equal to the
         Series B Preferred Shares obtained by multiplying the number of
         remaining shares by a fraction, the numerator of which shall be the
         number of Outstanding Series B Preferred Shares held by such Existing
         Holder subject to such Submitted Bid and the denominator of which
         shall be the aggregate number of Outstanding Series B Preferred
         Shares subject to such Submitted Bids made by all such Existing
         Holders that specified a rate equal to the Winning Bid Rate; and

                          (v) each Potential Holder's Submitted Bid for Series
         B Preferred Shares specifying a rate that is equal to the Winning Bid
         Rate shall be accepted but only in an amount equal to the number of
         shares obtained by multiplying the number of Series B Preferred
         Shares in the excess of the Available Preferred Shares over the
         number of Series B Preferred Shares subject to Submitted Bids
         described in paragraph 5(a)(ii) through (iv) by a fraction, the
         numerator of which shall be the number of Outstanding Series B
         Preferred Shares subject to such Submitted Bid and the denominator of
         which shall be the aggregate number of Outstanding Series B Preferred
         Shares subject to such Submitted Bids made by all such Potential
         Holders that specified a rate equal to the Winning Bid Rate.

                           (b) If Sufficient Clearing Bids for Series B
Preferred Shares have not been made (other than because all of the Outstanding
shares are subject to Submitted Hold Orders), subject to the provisions of
paragraph 5(d), Submitted Orders shall be accepted or rejected as follows in
the following order of priority and all other Submitted Bids for Series B
Preferred Shares shall be rejected:

                          (i) Existing Holders' Submitted Bids for Series B
         Preferred Shares specifying any rate that is equal to or lower than
         the Maximum Rate shall be rejected, thus entitling such Existing
         Holders to continue to hold the Series B Preferred Shares subject to
         such Submitted Bids;

                          (ii) Potential Holders' Submitted Bids for Series B
         Preferred Shares specifying any rate that is equal to or lower than
         the Maximum Rate shall be accepted; and

                          (iii) Each Existing Holder's Submitted Bid for
         Series B Preferred Shares specifying any rate that is higher than the
         Maximum Rate and the Submitted Sell Orders of each Existing Holder
         shall be accepted, thus entitling each Existing Holder that submitted
         or on whose behalf was submitted any such Submitted Bid or Submitted
         Sell Order to sell Series B Preferred Shares subject to such
         Submitted Bid or Submitted Sell Order, but in both cases only in an
         amount equal to the number of Series B Preferred Shares obtained by
         multiplying the number of Series B Preferred Shares subject to
         Submitted Bids described in paragraph 5(b)(ii) by a fraction, the
         numerator of which shall be the number of Outstanding Series B
         Preferred Shares held by such Existing Holder subject to such
         Submitted Bid or Submitted Sell Order and the denominator of which
         shall be the aggregate number of Outstanding Series B Preferred
         Shares subject to all such Submitted Bids and Submitted Sell Orders.

                           (c) If all of the Outstanding Series B Preferred
Shares are subject to Submitted Hold Orders, all Submitted Bids for such
shares shall be rejected.

                           (d) If, as a result of the procedures described in
paragraph 5(a)(iv) or (v) or paragraph 5(b)(iii), any Existing Holder would be
entitled or required to sell, or any Potential Holder would be entitled or
required to purchase, a fraction of a share of Series B Preferred Shares on
any Auction Date, the Auction Agent shall, in such manner as it shall
determine in its sole discretion, round up or down the number of Series B
Preferred Shares to be purchased or sold by any Existing Holder or Potential
Holder on such Auction Date as a result of such procedures so that the number
of shares so purchased or sold by each Existing Holder or Potential Holder on
such Auction Date shall be whole shares.

                           (e) If, as a result of the procedures described in
paragraph 5(a)(v) any Potential Holder would be entitled or required to
purchase less than a whole share of Series B Preferred Shares on any Auction
Date, the Auction Agent shall, in such manner as it shall determine in its
sole discretion, allocate Series B Preferred Shares for purchase among
Potential Holders so that only whole shares are purchased on such Auction Date
as a result of such procedures by any Potential Holder, even if such
allocation results in one or more Potential Holders not purchasing Series B
Preferred Shares on such Auction Date.

                           (f) Based on the results of each Auction for Series
B Preferred Shares, the Auction Agent shall determine the aggregate number of
such shares to be purchased and the aggregate number of such shares to be sold
by Potential Holders and Existing Holders and, with respect to each Potential
Holder and Existing Holder, to the extent that such aggregate number of shares
to be purchased and such aggregate number of shares to be sold differ,
determine to which other Potential Holder(s) or Existing Holder(s) they shall
deliver, or from which other Potential Holder(s) or Existing Holder(s) they
shall receive, as the case may be, Series B Preferred Shares. Notwithstanding
any provision of the Auction Procedures to the contrary, in the event an
Existing Holder or Beneficial Owner of Series B Preferred Shares with respect
to whom a Broker-Dealer submitted a Bid to the Auction Agent for such shares
that was accepted in whole or in part, or submitted or is deemed to have
submitted a Sell Order for such shares that was accepted in whole or in part,
fails to instruct its Agent Member to deliver such shares against payment
therefor, partial deliveries of Series B Preferred Shares that have been made
in respect of Potential Holders' or Potential Beneficial Owners' Submitted
Bids for Series B Preferred Shares that have been accepted in whole or in part
shall constitute good delivery to such Potential Holders and Potential
Beneficial Owners.

                           (g) Neither the Trust nor the Auction Agent nor any
affiliate of either shall have any responsibility or liability with respect to
the failure of an Existing Holder, a Potential Holder, a Beneficial Owner, a
Potential Beneficial Owner or its respective Agent Member to deliver Series B
Preferred Shares or to pay for Series B Preferred Shares sold or purchased
pursuant to the Auction Procedures or otherwise.

                  6. Transfer of Series B Preferred Shares.

         Unless otherwise permitted by the Trust, a Beneficial Owner or an
Existing Holder may sell, transfer or otherwise dispose of Series B Preferred
Shares only in whole shares and only pursuant to a Bid or Sell Order placed
with the Auction Agent in accordance with the procedures described in this
Part II or to a Broker-Dealer; provided, however, that (a) a sale, transfer or
other disposition of Series B Preferred Shares from a customer of a
Broker-Dealer who is listed on the records of that Broker-Dealer as the Holder
of such shares to that Broker-Dealer or another customer of that Broker-Dealer
shall not be deemed to be a sale, transfer or other disposition for purposes
of this paragraph 6 if such Broker-Dealer remains the Existing Holder of the
shares so sold, transferred or disposed of immediately after such sale,
transfer or disposition and (b) in the case of all transfers other than
pursuant to Auctions, the Broker-Dealer (or other Person, if permitted by the
Trust) to whom such transfer is made shall advise the Auction Agent of such
transfer.


                                   PART III

            ABILITY OF BOARD OF TRUSTEES TO MODIFY THE STATEMENT OF
                                  PREFERENCES

                  1. Modification to Prevent Ratings Reduction or Withdrawal.

         The Board of Trustees, without further action by the shareholders,
may amend, alter, add to or repeal any provision of this Statement of
Preferences including provisions that have been adopted by the Trust pursuant
to Rating Agency guidelines, if the Board of Trustees determines that such
amendments or modifications are necessary to prevent a reduction in, or the
withdrawal of, a rating of the Preferred Shares and are in the aggregate in
the best interests of the Holders of the Preferred Shares.

                  2. Other Modification.

         The Board of Trustees, without further action by the shareholders,
may amend, alter, add to or repeal any provision of this Statement of
Preferences including, without limitation, provisions that have been adopted
by the Trust pursuant to any rating agency guidelines, if the Board of
Trustees determines that such amendments or modifications will not in the
aggregate adversely affect the rights and preferences of any series of the
Preferred Shares, provided, that the Trust has received advice from each
applicable Rating Agency that such amendment or modification is not expected
to adversely affect such Rating Agency's then-current rating of such series of
the Trust's Preferred Shares.

         Notwithstanding the provisions of the preceding paragraph, to the
extent permitted by law, the Board of Trustees, without the vote of the
Holders of the Series B Preferred Shares or any other capital shares of the
Trust, may amend the provisions of this Statement of Preferences to resolve
any inconsistency or ambiguity or to remedy any formal defect so long as the
amendment does not in the aggregate adversely affect the rights and
preferences of the Series B Preferred Shares.

         IN WITNESS WHEREOF, The Gabelli Utility Trust has caused these
presents to be signed in its name and on its behalf by a duly authorized
officer, and its corporate seal to be hereunto affixed and attested by its
Secretary, and the said officers of the Trust further acknowledge said
instrument to be the corporate act of the Trust, and state that to the best of
their knowledge, information and belief under penalty of perjury the matters
and facts herein set forth with respect to approval are true in all material
respects, all on [ ], 2003.





                                                     By____________________
                                                       Name:  Bruce Alpert
                                                       Title:    President


Attest:

_______________________
Name:    James E. McKee
Title:   Secretary

</TEXT>
</DOCUMENT>
